Private Money: Definition of Terms

[Russell Zuck]

I'm probably overthinking this but I'm trained as an engineer so there is precedent for this kind of behavior.

I've read a bunch of descriptions of private money lending and I want to make sure I understand the details of the jargon used in these descriptions. Assuming the following "typical" scenario below, please help me with these questions. I realize the use of the word "typical" is loaded please take it to mean usual or common.

Scenario:

Property Value: $125k

Loan Value: $100k

LTV: 80%

Rate: 12%

Points: None

Term: 15 months

Collateral: 1st position lean

Questions:

1. Is the interest rate expressed in terms of APR or something else?
2. I've heard people describe the terms as interest only with a balloon at the end. What, exactly, does this mean (please include numbers)?
3. Let's say the loan was to be used for a flip. If I were, by some miracle, to pay off the loan in 8 months instead of 15, what would the cost of the loan to me typically look like (please include numbers)

Thanks, in advance, for the information.

Cheers,

Russ

[Kyle J.]

Originally posted by @Brandon Sok:

@Russell Zuck and @Tyler Gibson I am piecing together a similar deal. How are you all calculating 1% per month? Am correct in thinking its Interest Amount/Term rate? 

In my example a 130k loan at 12% with repayment at 24 months --- 130k x 12% = $15,600 then divided by 24 months = $650. So if I repay in 10 months my carrying costs for loan would be $6500?

If your APR is 12%, then this is how the math would work in your scenario: 130k x 12% = $15,600. If it's an interest-only loan, you'd divide that amount by 12 (number of months in a year) to get a monthly payment of $1,300.

You wouldn't divide it by 24 (months).  Just like with a traditional 30 year loan you wouldn't divide it by 360 (months).  That's just when the entire loan balance is due.