If you’re opting for hard money loans for the first time, you might be confused about who to trust.
Asking them a few questions will help you ensure that the hard money lender is trustworthy and credible. That’ll also help you avoid getting into an unpleasant situation with a hard money lender who adds hidden fees to your loan at the last minute or doesn’t deliver on time.
Any suspicious answers indicate you need to find a different hard money lender. Here’s what you need to ask them.
What Interest Rates Do You Offer And How Many Points Do You Charge?
Points and interest rates are the two factors that determine the overall cost of your loan. These depend on the region and the riskiness of your project.
Interest rates are usually 10% to 15% on hard money loans, with points ranging from 2% to 4% of the loan amount.
Is There Any Other Fee That’ll Be Charged on Your Hard Money Loan?
The upfront fee is another crucial factor you need to inquire about to ensure no hidden charges are applied.
If you fail to ask your lender this question, there’s a possibility they might charge you a lending fee that you didn’t know about.
Document fees and appraisals are customary, but some lenders even charge you an additional amount apart from the interest for lending.
What Loan To Value Ratio Do You Offer?
In loan-to-value loans, the amount is given based on the current value of the property. However, each lender offers a different percentage. Some offer 70%, while others offer 75%; it’s really up to the lender.
The LTV percentage is also influenced by the type of property you’re investing in. For example, residential properties have a higher LTV than commercial ones.
Similarly, rural properties have a low LTV than urban ones. Vacant lands have the lowest LTV due to the risk involved.
How Long Will Funding The Loan Take?
Time is crucial for real estate investors. Hard money lenders are preferred as they fund your loans faster than any other method of financing.
They’ll approve your loan and fund you in about 2-3 weeks maximum. In some cases, they can even provide your loan in 3-5 days.
If you’re looking for a reliable hard money lender in Atlanta, GA, to finance your investment, reach out to Commercial Private Equity. We’ll guide you on the best practices to fund your projects through hard money loans.
Contact us to know more about our loans.