Private/Hard money lending question???

Question

Do private money loans charge points from the full amount of loan or the amount remaining after the down payment?

Chris Seveney · Answer

@Hawazin Alabbasi

Points are charged upfront and a point is a percent

So if it’s 5 points that is five percent of the $100,000 loan = $5,000

Yes they are taken upfront and can be anywhere from 1-5 points

Chris Seveney · Answer

@Reinier Napoles

Loan amount is amount after down payment

Say you pay $120,000 and out $20,000 down. Your loan is $100,000. Points are based on loan amount of $100,000 (not purchase price)

Ned Carey · Answer

A true “private” loan probably no. A private lender is a friend family or associate who lends to you because they know and trust you. They are not professional lenders and often do not think about or even know about “points”.

Sadly many professional lenders have chosen to use the term “Private Lender” creating confusion in the marketplace.  These professional lenders are likely to charge points.

Now your question is confusing because your down payment is not part of the loan. I’m not sure what you are getting at with the way you phrased your question.

Caroline Gerardo · Answer

Points are a percent of the loan amount not the sale price. Sales price is total minus down payment equals loan amount.

Points can be charged on conventional, traditional, government, NonQM, hard money, and as you call them private loans.

Points are now forced on to non owner products where there is no zero points or rebate point pricing available. This is because the mortgage market is tighter than ever and lenders are afraid of early payoffs which cause them losses.

Eliott Elias · Answer

The full amount of the loan is what is remaining after the down payment. Yes, they charge points based  off the total loan amount.

Ned Carey · Answer

@Hawazin Alabbasi generally you need to start making payment right away. However the first payment is often included with the settlement costs. So the first time you need to send a check is after 1-2 months and then every month.

Jeff S. · Answer

One point is one percent of the loan amount.  On a $100,000 loan, one point would be $1000.  Two points would be $2000.  Etc.

Points are typically paid at closing when your deal funds, @Hawazin Alabbasi.  Your lender would wire $100,000 to Title and you would wire $2000. (for a two-point loan).  The lender would then receive your $2000.

This is sometimes a silly way to do it, so many loan documents allow the lender to "net fund" the loan.  In this case, the lender could just send the  $98,000 and you would send nothing.  Same result.

Note that points increase your annual percentage rate.  In the example above, the lender sent $98,000 but you owe $100,000.  Your payments would be based on the $100,000, not the net $98,000.

Private/Hard Money lenders are generally free to charge what they want -- only constrained by the market (you can shop around and say no) as well as any state usury restrictions.

Hawazin Alabbasi · Answer

Thanks!

Hawazin Alabbasi · Answer

Thank you!

Private/Hard money lending question???

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