Commercial Hard Money Loan Terms
Interest Rates, Terms, Loan Amounts, Etc.
Hard money lenders normally generating their income from points they charge during the escrow process. Income can be generated also from the interest rate being charged on the mortgage, so the hard money lender will charge 11% on the loan and the trust deed investor will get 10%- In this scenario the hard money lender makes 1% spread. Rates are normally between 8%- 12%, points start at 2.5 from the loan amount.
Hard money lenders are typically very savvy and well networked in real estate. They tend to lend to borrowers who are experienced developers who will pay higher prices on a loan in order to quickly close on the property targeted for development or re-development, and is strategy driven. Hard money loans typically range from 100,000 to $10,000,000 with interest rates ranging from 8%-18%. Points tend to range from 2-15 points with equity kickers if no one else will make the loan.
Successful hard money lenders in today’s market are shrewd when it comes to factors associated with the rewards side of the loan. In addition to a cost/rewards anlysis of the loan, the hard money lender needs to have a viable exit strategy in case the borrower cannot meet his obligations with respect to loan payments. Questions a commercial hard money lender should ask him/herself are, “If this property is undeveloped, what is the likelihood of entitlements being obtained prior to the maturity date of the loan and if the entitlements are not obtained by the borrower, will I be able to obtain them?” Also, “Do I have the ability to properly monitor the development activity of borrower?”
Contact HML Investment today for further information regarding Private Lending and hard money loans.