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Hard money loans can be an excellent option for those experienced in real estate who need a short-term loan with quick approval. These loans are often more expensive than traditional mortgage loans. Still, they are sometimes the best fit for particular projects, especially when purchasing discount properties or fixing-and-flipping houses. While not every project requires a hard money loan, investors should become familiar with this type of financing and determine if it fits their current circumstances. These loans can help accelerate projects by eliminating lengthy application processing times and providing access to capital quickly. Call our team today at 503-343-7999 to get the process started on your loan!

A hard money loan is a short term real estate loan used by house flippers to purchase and renovate properties. A hard money lender provides the capital the investor needs to purchase the property, complete high ROI renovations, and thereby increase the after repair value of the home. If approved, the real estate investor is required to pay back the full loan amount at the end of the loan terms (typically 12-24 months). Usually, the funds from the sale of the house are used to pay back the full loan amount. In most cases, hard money lenders will provide 70 to 90% of the funds needed to complete the project, meaning that the house flipper is responsible for covering the shortfall. For the process to work successfully, the after repair value of the property must be substantially more than the original purchase price. To learn more about hard money loans we offer give our team a call today at 503-343-7999.

Reputable Hard Money Lenders like NW Private Lending offer interest-only repayment terms. For example, if you were offered a $200,000 hard money loan, with a 10% interest rate, your monthly payment would work out to $1666.66. Here’s how your loan payment would break down: Amount Borrowed: $200,000 Annual Interest Rate: 10% Monthly Repayment: Amount Borrowed * Annual Interest Rate / 12 Monthly Repayment: $200,000 * 10% / 12 Monthly Payments: $1666.66 In other words, your monthly payment only covers the interest portion of the capital that was borrowed. However, you are required to pay back all the capital that was borrowed when the loan expires. It helps to think of it as a balloon payment, but instead of paying a portion of the capital back, your balloon payment covers the full amount borrowed.

Loan Origination Fee: 3 Points (minimum $2,500) Loan Document Fee: $650-850 Monthly Interest Rate: 1% per month Monthly Payment: Interest Only Closing Costs: Paid by Borrower Loan Closing: 3-5 Business Days Loan Amount Range: $50,000 up to $2,000,000 Loan Maturity: 1 month to 10 years Property Appraisal: Not Required Underwriting Fee: None Pre-Payment Penalty: Never Extension Fee: $0 on performing loans

In most cases, the borrower that is hoping to purchase and flip a property is required to put down between 10% and 20% of the total project cost. For example, if the hard money lender covers 85% of the project cost, the investor would need to cover the shortfall of 15%.