on a hard money loan, if the interest is 12%, is that monthly or loan life? I'm a newbie so I apologize now but this would help me a lot. ex. on 100k, can it really be 12k a month? or 12k for the overall loan? can anyone clarify this quickly? Thanks guys!
12% per year, so $12k per year or $1k per month
Also pay close attention to points (3 points = $3K on 100k loan) and ask if there is a minimum holding time or prepay penalty, new to hardmoney myself but these are some items I see that can possibly drain $$$ from a deal.
My thoughts on interest and loans.
It doesn't matter what it is if thats your only option.
Would you pay someone 10,000 to make 35,000?
Any day :)
thanks guys! that helps a lot.
@Garrett Gable - just as there can and is property selling at stupid prices, one can also enter the stupid zone with borrowing. Only option? There is always another option. If all does not go as planned (and it rarely does), the only thing guaranteed at the end of the day is the high rate, high origination costs and looming deadline of your loan. Borrow with measured risk, always!
As an aside - account for closing costs, realtor fees, holding costs and taxes (at your highest marginal rate) in your flip deals.
The terms should be outlined in the note document.
thanks again for the replies. Hml is last resort if I can't find a partner. I will be going to the next re investor meeting in August. Hopefully I can meet someone. I'm trying to check off the boxes as I learn. Thanks to all.
When you hear 12% or 6% or 3.75% that is almost always being expressed as an annual rate. As other posters mentioned, there can be other costs such as points. If you are borrowing at 12% plus 4 points that means 12% plus 4%! Therefore, a loan at 6% would cost you .5% per month. A loan at 12% would cost you 1% per month. Points are typically either charged at time of borrowing or in some cases added to the note. If you are seeking a HML, you must present a solid deal to a borrower so they have the confidence to make the loan believing that you will perform. Good luck.
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