I’m looking at Condos in my area in the $250k range, pulling $22.5k out of the 401k to buy, but was considering (if possible) a hard money lender for the other $40k (for 24 months) to avoid pmi (which is $270)
My Questions are:
Are there hard money lenders to stay away from?
How is it paid back?
Is 24 months even doable (and/or wise) for the amount I need (I see only 12 months advertised)
You'll pay a massively higher rate for a private loan than you would for PMI, and hard money lenders really cap out at 12 months. You could look at partnering with another investor, but I'd suggest taking a step back and seeing if a condo is really the right investment anyway.
I am assuming you are using the 40k for a down payment. Most Hard money lenders are going to want 1st lien position and even if everything breaks right and a lender will take second position, a 40k loan amount is so small it eliminates a ton of options- An Asset based Lender at 75% to 80% LTV is your best option if you can not get conventional funding
@Dame Notnow , if PMI is $270 a month, you'd be better off paying that.
Let's say hypothetically you find a private lender to have no lien position in your property (highly unlikely), on top of this, you find one that charges zero points (highly unlikely again) on top of all of this, they only charge you 8% (rates are 10+ from everything I'm seeing in hard/private money). Even with the three miracles that just happened, at interest only on $40k at 8% is $266.67 per month, so you're saving less than $4 dollars per month, and need to come up with that $40K in two years anyway. Seems a lot of trouble for no return.