hard money loans

Interest rates on hard money loans are much higher than traditional bank financed loans. The first reason why conventional residential or commercial property loans because there is a higher risk involved and shorter duration of financing. Interest rates are also dependent on how the real estate market is doing and the amount of hard money credit available.

Another factor is that most borrowers who use hard money need their loans quickly to purchase property at a profitable discount but their lack of credit requirements or debt make it almost impossible to get conventional Bank financed loans.

View the info-graphic and information below to find out the common interest rates of hard money lenders, how location and condition of your property effects points/interest rates and other loan fees associated with hard money lending.

Contents:

• Infographic
• Hard Money Interest Rates
• Hard Money Points
• Loan Fees
• Loan Terms & Amounts
• Interest Considerations
• Points & Fees Consideration
• Conclusion

Interest Rates On Hard Money?

Hard money lender’s interest rates depend on the lender. Common hard money interest rates can be as low as 8% interest all the way up to 21% interest with the average hard money interest rate falling in at 14%, and terms can last for 6 months to a few years. Some lending companies will defer your interest payments, being that most lenders don’t want interest payments during the rehab phase.

Default Interest Rates On Hard Money

When borrower’s default on hard money loans they might be charged a higher “Default Rate”. Default rates are controlled by law and have a cap, defaulting on a hard money loan could leave you stuck paying extremely high percentages upwards of 25%–29%. Some private money lenders will collect a pre-payment penalty and some offer loans with no pre-payment penalties.

Credit Scores Effect On Interest Rates

Credit scores of the borrower weigh heavily on interest rates, especially with hard money lenders. The borrower’s experience and ownership of property might also have an effect on the given interest rate by the lender.

Hard Money Points

Not only will there be interest but hard money lenders also charge loan fees on your hard money loan. Typically, hard money lenders will charge you 2 – 10 points, or 2 – 10% of the total amount of the loan, this is referred to as your loan fee. It pretty common for a commercial hard money loans to start at four points, and go as high as 10 full points. 1 point is equal to 1% of the mortgage loan. Therefore, charging one point on $100,000 loan = $1,000 in loan fees. If you’re getting charged the 10 points, you are going to need to come up with $10,000 for the loan fee.

Loan Fees Associated

For investors that are used to traditional bank loans only having 1% or lower loan fees, this higher percentage can be a “shocker”. Usually this loan fee is set in stone and isn’t effected by experience, credit or the property’s characteristics.

Another factor that should be taken into consideration is the amount of time it takes for the lender to fund the loan. If you are new to their company it might take a little longer than someone else that has already had a loan funded previously. Taking this into account, it’s a smart decision to find a hard money lender that you can build a rapport with for future lending purposes. You want to be able to get your loan funded as fast as possible when trying to take advantages of great investment properties.

Loan Terms & ARV (After Repair Value) Amounts 

You want to find a hard money lender with terms that suit your needs. Here are the basic terms hard money lenders offer. Most lenders will only loan you 70% ARV (After Repair Value) of your home. The means that the lender is able to loan you 70% of what your repaired home is worth. For example: Let’s say you have a home worth $50,000 in its existing condition and its needs $10,000 worth of repairs, so after repairs, the new market value is worth $100,000. In this case the hard money lender would only be able to loan you $70,000 dollars.

**Important: All borrowers of hard money should use a real estate attorney to make sure your property is not sold or given away by you going into default or having late payments. Most of these procedures could be stopped by a credible real estate attorney and would require a court judgment.

How The Location & Condition Of Your Property Effects Loan Points & Interest Rates

Locations Effect On Points

The location of the property your buying has an effect on the amount of points you will be charged for loan fees. A great location will keep you in the 2-6 points range, an average location will cost you 3-8 point and a bad or remote location will cost you 5-12 points.

Location’s Effect On Interest Rates

The location of the property your buying also has an effect on the interest rate you will be charged for loan fees. A great location will keep you in the 9-12% interest range, an average location will cost you 10-13% interest and a bad or remote location will cost you 11-14% interest on top of your financed loan amount.

Condition Of Property’s Effect On Points

Depending on the condition of your property, you may have to pay additional loan fees. A property in bad condition will cost you an additional 1 to 3 points. A property in average condition won’t cost you any additional but a property in great condition could actually save you 1 to 2 points off of your loan fee.

Condition Of The Property’s Effect On Interest Rates

Depending on the condition of your property, you may have to pay additional loan fees. A property in bad condition will cost you an additional 1 to 3% interest. A property in average condition won’t cost you any additional but a property in great condition could actually save you .5 to 1% off of your interest rate.

Credit Scores Impact On Interest Rates & Points On Hard Money Loans

Credit’s Effect On Points

Credit scores impact the amount of points you will be charged in additional loan fees. Bad credit will raise your loan 1 to 3 points. Average credit will not affect your loan and great credit could possibly get you a discount of .5 to 1 point.

Credit’s Effect On Interest Rates

Credit scores also impact the amount of additional interest you will be charged on top of your loan fees. Bad credit will raise your rate 1 to 3%. Average credit will not affect your loan and great credit may get you a discount of .5 to 1%.

Conclusion:

It’s safe to say that if you are looking for a hard money loan, make sure that you have good credit, your property is in a good location/condition and that you are able to make payments on time to avoid the costly fees associated with hard money lending/financing.

Loan Programs, Rates & Fees We Offer in Phoenix, AZ: No Pre-Payment Penalty

Looking for a mortgage, but having trouble due to your credit score?

Here are some things you can do to get your credit score headed in the upward direction so you can secure the loan you need to live in a home that is desirable for you and your family. Your credit score is viewed by lenders as a direct indication of your willingness and ability to pay back off loans and debt. Another way to look at it is the level of probability that you end up defaulting on the in the first 90 days. It may help you to view your credit score like more of a grade you would receive in school instead of an arbitrary number associated with you. If you have high grades you advance to better classes and receive preferred placement in the academic world and it’s no different in the financial realm. If you grade out high you will advance to better neighborhoods and receive preferred consideration when you make offers on properties or vie for loans, etc.  Keeping tabs on your score as you would you GPA will majorly increase the amount of attention and effort you give to improving your score (grade) and your overall life situation. If you are constantly aware of you credit standing, you will be less likely to make moves that could be potentially harmful to your credit because you eliminate the ‘out of site, out of mind’ factor that has been the downfall of many. The difference between your GPA (grade point average) and your credit score is the fact that you never graduate with credit and you always need to keep your score as high as possible. It’s a lifetime of performing your due diligence to get ahead.

If you fail in school you are given a chance to redeem yourself, whether you are re-taking a test or doing an entire grade over. Credit is the same way. You can always take action to raise your credit score, the amount of work and time it will take to reach redemption depends on how deep of a hole you have dug yourself into. The best place to start rebuilding your score is to look at any outstanding debts and start the process of getting them taken care of as soon as possible. You will see a significant boost to your score after amending any outstanding debts.

After attending to your outstanding debts you need to make sure that you NEVER fall back into the old habits, practices and mind sets that got you into the debt you just eliminated. That cannot be stressed enough; fixing your credit score is more than just a specified mission to improve one area of your life. In effect, improving your credit score comes along with making changes to your overall lifestyle. Approaching this as a wholesome change that will be permanent will put you on the path to reaching the state of mind where the changes you are making become second nature instead of necessitating conscious attention like they will initially.  Make your payments on time, or better yet, early WITHOUT EXCEPTION. This will assure your consistency will always be reflected on your credit report and your score will continually increase. This goes for any payment, small or large, and should become your new status quo for the long haul.

Be sure to not try to do too much at one time in order to remedy your credit score. Just like in school, it will be much easier to attain high scores and be efficient in your studies if you take on a course load that agrees with your lifestyle and schedule. If you take on too many classes during one term, your scores are going to suffer across the board because your attention is being exponentially divided and partitioned. The same thing goes for your credit score. If you try to take on too many remediation steps at once, you will ultimately fall short of your goals or significantly delay yourself from arriving at your desired destination.  Focusing on a few areas at a time until they suit the credit situation you are trying to create for yourself. Doing this ensures you will give full focus to the areas you have chosen to for your current efforts in raising your credit score. Seeing each area through to a satisfactory level will leave you looking at a very complete picture once you have concluded your efforts to rebuild your credit. Think of it like building a structure…..you can’t focus on the roof until the foundation and walls are planned for and built. It would make no sense to build your roof before the rest of the house is done. Start your work at the foundation of your credit score. You will build a sturdy, beautiful and practical structure in the end.

Another tactic that could be effective is disputing your credit score as you would a grade that you disagree with or feel you do not deserve. Just like when you used to complain to your teacher about your grade, you can also take up direct dispute with your credit score. The difference is that with your credit score it will take about 3-5 years for a negative mark to fall off your credit report. If you keep up positive credit practices your entire report should be clear within five years and you should be living with a shiny inflated credit score that will open up brand new possibilities for you and your family!

Are you refinancing mortgage with bad credit or are you in need of a no credit check, hard money loan for fix and flip, real estate, business loans, short sales or other endeavors with quick turnover in Phoenix or Scottsdale, AZ? Look no further than Brad Loans, the most trustworthy direct hard money lender and private money lender in Arizona! Brad loans is the best hard money lender in Arizona with the ability to fund residential & commercial hard money loans sometimes within a couple days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

Hard money loans are a type of loan that is usually not issued by a bank but by a private money source. Hard money loans can be very helpful in short term investments or real estate endevours. They are usually know for their fast funding, higher interest rates and no hassle quick loan approvals. If the interest rates are higher, you would think people would not want to get a hard money loan right? That’s false, below are 6 reasons to use hard money loans when you can’t get financing from bank or other lenders.

Hard Money Loan Uses Include:

1. Ultra Fast Funding: Sometimes the perfect real estate opportunity comes up at the drop of a dime and you don’t have time to wait for a bank loan. When bidding on a property you are going to need either cash or hard money lending in place of that cash. You don’t want to miss a profitable opportunity when it comes.
2. Fix & Flip or Rehab Properties: Banks usually wont fund fix and flip or rehab properties because they pose too much risk. Often the most profitable real estate opportunities require repairs, cosmetic rehab and past due maintenance. The only way to make these costly repairs quickly and easily is to either have the cash or be funded by a hard money or private money lender.
3. No Credit or Bad Credit: Do you have no credit or bad credit and want a traditional bank loan? Good luck! Banks don’t want to lend you money unless you have some already to cover the loan just in case you can’t pay it back. Now, if you had the money you would of already funded the project yourself right? Of course you would but you don’t and that why hard money lenders are your saving grace! The don’t care about credit as long as you have equity or collateral for the loan. Even people with a bankruptcy or foreclosure on their credit history can still get hard money loans.
4. Construction Loans: Whether you’re a home owner or contractor and planning on building your dream home, building a four plex, borrowing to finish and unfinished home, remodeling your existing home or building a 5 spec home, hard money loans can help at any stage of construction to help you get these projects completed when bank won’t fund your construction loan.
5. Unable to Get Traditional Bank Loans: Traditional lenders have very tough criteria to meet in order to receive a loan. Traditional banks usually won’t offer loans for: People with bad or no credit, fix and flip opportunities, finishing or building new construction or buying or purchasing land. Hard money lenders will fund all of these endeavors and more.
6. Land Loans: There are many different forms of land including Raw Land, Developed Land and more. From a single lot of land to a subdivision. If your land is surrounded by commercial buildings or other houses you will find a hard money lender much easier. This will give the Land lender good insight about the value of the property.

Hard money loans may be your only option depending on the investment you plan on making so make sure you have a reliable hard money lender in your contacts. Brad Loans is one of the most reliable and trustworthy hard money loan lenders in Phoenix, Arizona. Give us a call today if you are interested in hard money loans for fix and flip, finishing construction, refinancing your mortgage, buying land, or need loans for other opportunities but have bad or no credit. Give Brad Loans a call today at (602) 999-9499.