Paying back a hard money loan question?

[Vernell D Watson]

Hello All,

I just got off the phone with a private money lender for a potential flip. He offered me 90/100. 90 percent acquisition of the property and 100 percent rehab up to 70 percent of the ARV. The property cost 120K and the rehab cost was going to be 90K. I was going to pay cash for the acquisition and needed to borrow 90K for the rehab. When I asked the potential lender how much it would cost me each month to repay the loan he basically said 1% each month of what I borrowed. 90k x 1% = 900 per month. The plan was to pay my contractor in stages over four phases of the project until it was complete and here is where my question comes up. My lender stated that I would have to pay him each month starting from the first month based on the entire loan amount of 90K. I thought I would only have to pay him each month based on what I have borrowed at that time not the full amount. What am I missing? Also If what he is saying is correct, what If I end up only using 70K instead of 90K for the project? Would I be reimbursed?

Please advise,

Vernell

[Shawn Ward]

@Vernell D Watson some HMLs based their monthly payment on the total, no matter what is dispersed (usually for newbies), and then offer experienced investors payments that are ONLY on what has been dispersed. 

That is why you should ALWAYS pitch your deal to multiple HMLers for every deal. 

All the best!

sjw