If I get a hard money loan and I am able to pay it off by transferring it to a conventional loan with a bank in a month or two would the hard money lenders usually allow this and would there usually be a fee for early payment?
I guess I am wondering if I have to wait a specified length of time before I can transfer the hard money loan to a conventional loan with a bank.
Many hml’s will have minimum time, you’d pay the additional interest but you need to talk to the individual lender.
Most short-term hard money rehab loans have no pre-payment penalties. The ones that I have seen otherwise require 3-4 months minimum interest payments. So if the requirement is 3 months of interest, and you're able to pay it off in two, you just pay an extra month of interest at close. Or you can just align the refinance to occur right at the 3-month mark.
Different HMLs may have slightly different terms. A seasoned investor may get better terms than someone using a HML for first time or first flip. Terms could be negotiable. I would ask your questions of a few HMLs that you might use and let them answer your questions. Anyone one else's reply is a quess based on their experience which may not apply in your case with your HML.
@Ben M. Hello Ben! I think depending on how your deal is structured. Many HML require atleast 6 months if you have a 12 month loan but if you know you will be paying it off early there are programs that dont have any prepayment penalties.
Typically 90 days of interest will be required, so if you pay off HML on day 88, you are still responsible for 2 more days of interest.
@Ben M. Every HML is going to vary slightly on their terms, including prepayment of the loan. I would engage with several lenders and find the option that best fits your needs. You should also be able to negotiate the terms, especially if you have a good deal and strong personal finances/experience.