Paying off hard money lender?

Question

Hey there BP friends! I’m just starting out and looking into a SFH that is bank owned. It was foreclosed and needs full remodel.

I’m assuming that I will need a hard money lender.

What are decent rates for a hard money lender?

Also how is the hard money lender paid off after refinancing the house?

Michael Kinsella · Answer

Hi Richard,

Typical rates for a bridge product (which it sounds like you're after based on the above description) would be somewhere between 8-13%. You can also assume the HML is going to charge a couple of origination points.

Additionally, you might want to inquire about the additional fees that each lender charges, and the term lengths they would offer. This can help to generate a true apples-to-apples comparison of hard money lenders.

It wouldn't hurt to speak with a few different lenders and get an idea of what they might charge for your specific loan scenario.

You can find hard money lenders through the 'Network' tab on BiggerPockets. That often serves as a decent starting point.

A portion of the proceeds from the refinance (often done through a bank) will go towards paying off the hard money lender. Assuming you improve the value of the property significantly, you will likely be in line for a cash-out refinance, where the new lender (often a bank) replaces the hard money loan and gives you cash above and beyond the new loan amount.

Hope this helps,

Michael

Richard Tamayo · Answer

Thanks for the advice Michael appreciate it!