Hard Money Lender Fees

4 Replies

Hello Bp Community
Hopefully everyone is having a great $$$ day! Quick question, is it normal for a hard money lender to ask for a 2000.00 initiating fee to get the process started? What are your experiences? They said it would be applied to loan cost afterwards. Thank you in advance!!!
Tony GO SPARTY FINAL FOUR!!

Originally posted by @Tony Benacquista :

Hello Bp Community
Hopefully everyone is having a great $$$ day! Quick question, is it normal for a hard money lender to ask for a 2000.00 initiating fee to get the process started? What are your experiences? They said it would be applied to loan cost afterwards. Thank you in advance!!!
Tony GO SPARTY FINAL FOUR!!

 Initiation fee? Was it part of a 20% down requirement or an origination fee? You could always post or email an itemized list of the fees to have responses and comments on what seems weird if any.

I'm unfamiliar with lenders who charge "initiation fees". I'd try to talk to a few other investors who have used the company you spoke of to see what their experience with them was like. Maybe talk to a couple other lenders to see if they charge that fee as well. 

Ask them if the initiation fee goes toward the down payment or the origination points and ask if it is refundable if your loan request gets denied. And if it is refundable make sure you get that in writing. 

@Tony Benacquista

Hi @Tony Benacquista

We ask for a deposit from our borrowers prior to moving forward. There is a decent amount of work a HML will need to do to underwrite the loan and we like to make sure we are working with someone who is serious about taking out a loan from us. The deposit helps ensure this.

That said, the deposit is held in escrow and per our term sheet outlines what the deposit will be used for. (i.e. Appraisal, legal fees, etc.) Any amount we don't spend is credited at closing. Further, if the process stops for whatever reason, we refund any amount not spent. As Matthew mentions, you should get all of this is writing. You should get a Term Sheet from the lender that outlines all fees, points, rates, etc. before sending any money to them.

Hope this helps!

Matt

I don't ask for anything up front as a HML. I do add points in which the borrower usually has me roll into the loan. I would be wary of anyone wanting fees up front. Check the reputation of the lender if in question.

John Thedford, Real Estate Agent in FL (#BK3098153)
239-200-5600

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.