Taking out a hard money loan can be one of the best ways to grow your real estate investment portfolio. Hard money loans fund fast, have simple guidelines, and focus on the collateral. But now to lenders are created equal.
Before you apply for a hard money loan, here are some questions to ask your lender.
1. What is the Repayment Period?
The repayment period is the most important part of the hard money loan. Since they are typically short-term loans, you should understand how long you have to pay it back. Many loans require interest-only payments at first, but then the entire amount becomes due before you realize it.
Make sure the due date fits within your timeline. Say, for example, you plan to fix and flip within 12 months. You’d be good with a loan that has an 18 – 24 month due date just to give you a buffer period.
2. What’s the Interest Rate?
Of course, everyone wants to focus on the interest rate, and you shouldn’t pay more than necessary. While the interest rate shouldn’t be the only deciding factor, it doesn’t hurt to ask what the rate is and if there’s anything you can do to lower it. Getting quotes from several lenders can also show you what options you have.
3. How Much do I Need to Put Down?
All loans require a down payment, so always ask how much is required. Since hard money loans are private, each lender has different rules. On average, expect to put down between 10 – 30%, but it will vary based on your qualifying factors and what the lender requires.
4. What are the Fees?
Most hard money loans have fees of some sort. Ask what they are and compare it to other loans from other lenders. Looking at the loan’s full cost over the entire term can help you decide which loan is right for you.
5. How Fast will the Loan Close?
One of the benefits of hard money loans is how fast they close. Unlike traditional loans, they can close in a week or two depending on the lender. But not every lender has the same turnaround time. If you’re in a rush for the funds, make sure you work with a lender that can turn it around fast enough.
One of the best ways to ensure you’re getting the best deal on a hard money loan is to work with a reputable broker like Save Financial. We work with only the best lenders in the industry, providing you with the best rates and terms on your hard money loans.
Our professionals work with you side-by-side to compare your options and make sure you get the loan that is the most beneficial for your real estate goals. Whether you’re buying your first investment home or you’re growing your portfolio, we are here for you every step of the way.