How do you negotiate down HML points when you bring repeat business to same HML?

Question

How do you negotiate down hard money lender's origination points when you bring repeat business to the same hard money lender?
Any case studies or life experiences with persuading hard money lenders to actually soften their points and/or rates for repeat borrowers?

Chris Seveney · Answer

Shop around. I would never rely on one hard money lender. I would have multiple in the arsenal and see who can do it for a better deal.

Devin Peterson · Answer

It’s not really a matter if persuading a hml to give you less points its more or less about the nuances and consistency of deal flow. For example, I have a borrower who lives of fix and flips - he will bring me at least 2 loans a month consistently where the loan amounts average apps 300k+. For a great repeat clien, we charged 1.5%. We have another borrower who likes section 8 rentals, these loan amounts tend to be smaller in size and sometimes even more complicated. The same process of originating goes into a $1M loan as it does a $100k loan, so naturally no one wants to work for less and there is a minimum industry price people set for themselves. (E.g., $3500, or 1%) - So depending on your actual consistent flow, the loan amount, I would approach a HML with a clear plan, market, and team up together with someone who has that ability to get creative with you!

Mike Grudzien · Answer

You need to have solid relationships with at least 3 lenders and all 3 should know that you have other relationships.

Stacy Raskin · Answer

I think lenders have some flexibility but depending on the company structure there is a minimum that professionals are looking to make for the work done. Also, having consistent deal flow can be helpful for a lender. The type of deal and level of complexity is important as well. Also, how is the investor like to work with? Is it an easy and smooth working relationship, is the investor responsive to paperwork requests, etc. Having a good working relationship where the mortgage broker or lender likes working with the investor and vice versa is very helpful.

Also, the lender or broker having a good reputation from first hand experience or through research as someone who can fund the loan on the terms as discussed is very important. Some mortgage brokers or lenders, will mention rates and terms at the beginning and then change those rate and terms later in the process when the investor is further along in the process such as having already paid for the appraisal. DSCR and fix and flip loans are business purpose loans and are not regulated the same way as owner occupy loans so the terms can legally be changed at any time. It's important to work with a broker or lender that will do what was discussed and not change important rates, terms or guidelines in the middle of the process. There is a value in a consistent and reliable working relationship especially when large sums of money are on the line.

Mitch Kowalski · Answer

From the borrower side, the biggest thing that actually got my points down wasn't just doing repeat deals with the same shop. It was making their job easy. I've closed with probably 4-5 different HML shops in KC over the years and the two I use regularly now both cut my points after deal 3 or 4, but not because I asked. They brought it up.

What I did was show up with a clean package every time. Full scope of work, comps pulled, title already ordered. When you hand a lender a deal that's ready to underwrite and they don't have to chase you for docs, they notice. After a few of those they start treating you different and the point conversation happens on its own.

The other thing nobody mentioned is if you're also sending other borrowers their way. I wholesale deals so my buyers need lenders too. Once I started routing my buyers to the same HML shop my leverage went way up. They're not just getting one deal from me, they're getting 3-4 a month across my buyer network. That's when I went from 2.5 points to 1.5.

Mitch Kowalski · Answer

Competition matters for sure, I'm not saying loyalty alone does it. But when you're the guy sending them 3-4 deals a month and every file is clean, they'll find room on the points before you even bring up another shop's term sheet. Market sets the floor, volume and reliability gets you closer to it.

Scott Wolf · Answer

My firm gives better terms to more experienced borrowers, as well as to higher loan amounts on the short-term side.  Happy to see if we can assist.

How do you negotiate down HML points when you bring repeat business to same HML?

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