Local Bank Financing Question

1 Reply

I am currently trying to set up my funding for a flip. I found a local bank that loans on fix & flips and the terms seem better than the Hard Money lenders I've talked to. They will loan 75% of the purchase and 100% of rehab with a minimum $100,000 loan and the rate is WSJP plus 2% interest only, a 2% fee, and a 12 month term. Can someone please explain to me the breakdown of this loan. Lets use an example of a $100,000 purchase price and $40,000 rehab. What would I pay?

So you'll start off with a loan of $75,000. 2 point fee up front so $1500 cost. Your rate will then be 6.5%, but adjusting monthly if applicable. Prime is generally lock step with fed fund and that's 2-3 more hikes of .25 so the rate will be 7 or 7.25% most likely at the end of the year. Then you'll be on a draw on the additional $40,000 and they pay it directly to contractors I'm guessing as needed and the interest starts accruing on that when disbursed. I'm guessing the 2 points also applies so another $800. You didn't state the amortization which will help you determine your payments. Then the whole things balloons ( is due in 12 months). I don't like that part. Everything else sounds fair.

Matt

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