Broker expense and Hard Money
Flipper/Rehabber · Bloomfield CT · Member since 2020 · 1k+ posts · 408 votes
Broker expense and Hard Money
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Nick BelskyBusiness Member
Residential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votesBit of a loaded question...
For bridge loans, lenders will normally charge a point or two and collect interest on payments to meet their margins. The broker only gets paid at closing and one time, in most cases. Generally speaking, lenders charge between 1-2 points as do brokers. If the loan amount is smaller, then most have minimums were percentages may look awful high, but the dollar amount isn't actually that much. Alternatively, as the loan amounts get higher and higher, most lenders will not lower their fees, where most brokers will. All is relative to individual brokers and lenders, of course.
For perm loans, like DSCR, the vast majority of lenders don't charge any points and rely on their profits coming from a one time underwriting or processing fee and the sale of the loan to the secondary market. Brokers will almost always have a much higher fee than lenders for perm loans. Some brokers are able to bake their fees into the rate to make their fees lower, but you are still paying for it one way or another.
For Commercial loans, it is entirely different and varies greatly by product. SBA programs limit broker fees and are not allowed to be on the HUD at all. Small Balance loans are usually limited to 2% for brokers and I rarely see a lender charge any points on these. For institutional such as Balance Sheet loans or Structured Financing, things get pretty creative, but lender's fees look low as they bake it all into the rate. For CRE bridge loans, they are pretty similar to residential ones. 1-3 points are pretty normal with a 1-2 point broker fee on top.
Everything is subject to each specific deal, but I can say as a broker, I do typically charge a little more on the first deal with a client as I have nothing on them. I have to build the profile, verify experience, financials, docs, etc... there is a lot more that goes into that first loan than most folks realize. Subsequent loans get lower broker fees as I already have 80% of the file and only need updated docs and deal specific docs to do my prelim underwriting before quoting and submitting to a lender for pricing. I can't speak for all brokers by any means, but I don't believe in hiding fees and fully disclose my fees in my quotes and ensure they are disclosed on the HUD, if allowed.
Hope this sheds some light on things for you. Always happy to chat if you'd like to dive in a bit deeper as well.
Cheers!
Belsky Mortgage, LLC527 Reviews
12 Replies
- Lender · Springfield, MO · Member since 2023 · 104 posts · 78 votes5moIt depends on the broker and the type of loan. I am a broker and for DSCR with most of our lenders you are not paying extra. For a rehab loan or bridge loan you probably will be paying more. For the short term loans, lenders really only make money on the interest and upfront fees so it is hard for them to cut the upfront fees out that they would typically charge.
- 5moMike GrudzienPro MemberLender · Eugene, OR · Member since 2019 · 2k+ posts · 1k+ votes
Quote from @Brian Cauldwell:
It depends on the broker and the type of loan. I am a broker and for DSCR with most of our lenders you are not paying extra. For a rehab loan or bridge loan you probably will be paying more. For the short term loans, lenders really only make money on the interest and upfront fees so it is hard for them to cut the upfront fees out that they would typically charge.Brian summarized this nicely.
- 5moJonathan LeeBusiness MemberLender · FL · Member since 2025 · 86 posts · 30 votes
Not necessarily. Using a broker doesn’t automatically mean the deal will cost more than going directly to a hard money lender. In many cases, brokers have access to multiple lenders and can help compare options, negotiate terms, and find the structure that best fits the project. Sometimes the pricing is the same, and occasionally it can even be better depending on the scenario and relationships in place.
Where costs can differ is with short-term or rehab/bridge loans, since those lenders typically rely more on upfront fees and interest as part of their business model. The real value of a broker is transparency. Helping the borrower understand the total cost of capital, timelines, and exit strategy so there are no surprises.
Helm Mortgage Corp.5126 Reviews - 5moStacy RaskinBusiness MemberLender · Member since 2022 · 1k+ posts · 501 votes
No, going to a broker will not cost significantly more. it may cost less. A well know hard money lender charges a certain amount of fees and a broker can charge the same, more or less fees. So it really depends on the broker and the lender.
Also, for loans such as DSCR loans- some mortgage brokers work with wholesale lenders. Wholesale lenders specialize in DSCR loans and work directly with brokers and don't advertise directly to the public. Wholesale lenders who specialize in DSCR loans often have lower rates than other lenders and banks because they are outsourcing a significant amount of the work to the mortgage broker who is not an employee (and doesn't come with the costs like benefits, etc). Wholesale lenders that work with mortgage brokers often have better rates and more favorable investor loan guidelines. Banks and retail lenders often charge more fees than brokers because they often have significantly higher overhead such as more rent, paying out more employees, etc.
Bright Skyline518 Reviews - 5moNick BelskyBusiness MemberResidential and Commercial Broker · Member since 2021 · 1k+ posts · 704 votes
Bit of a loaded question...
For bridge loans, lenders will normally charge a point or two and collect interest on payments to meet their margins. The broker only gets paid at closing and one time, in most cases. Generally speaking, lenders charge between 1-2 points as do brokers. If the loan amount is smaller, then most have minimums were percentages may look awful high, but the dollar amount isn't actually that much. Alternatively, as the loan amounts get higher and higher, most lenders will not lower their fees, where most brokers will. All is relative to individual brokers and lenders, of course.
For perm loans, like DSCR, the vast majority of lenders don't charge any points and rely on their profits coming from a one time underwriting or processing fee and the sale of the loan to the secondary market. Brokers will almost always have a much higher fee than lenders for perm loans. Some brokers are able to bake their fees into the rate to make their fees lower, but you are still paying for it one way or another.
For Commercial loans, it is entirely different and varies greatly by product. SBA programs limit broker fees and are not allowed to be on the HUD at all. Small Balance loans are usually limited to 2% for brokers and I rarely see a lender charge any points on these. For institutional such as Balance Sheet loans or Structured Financing, things get pretty creative, but lender's fees look low as they bake it all into the rate. For CRE bridge loans, they are pretty similar to residential ones. 1-3 points are pretty normal with a 1-2 point broker fee on top.
Everything is subject to each specific deal, but I can say as a broker, I do typically charge a little more on the first deal with a client as I have nothing on them. I have to build the profile, verify experience, financials, docs, etc... there is a lot more that goes into that first loan than most folks realize. Subsequent loans get lower broker fees as I already have 80% of the file and only need updated docs and deal specific docs to do my prelim underwriting before quoting and submitting to a lender for pricing. I can't speak for all brokers by any means, but I don't believe in hiding fees and fully disclose my fees in my quotes and ensure they are disclosed on the HUD, if allowed.
Hope this sheds some light on things for you. Always happy to chat if you'd like to dive in a bit deeper as well.
Cheers!
Belsky Mortgage, LLC527 Reviews - Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes5mo
So it is a cost/benefit analysis for the borrower.
What a broker is supposed to bring: Shopping ability, process expertise, industry temperature, security in lender. If they do all that and charge 1 point for them, I'd think most would say it is worth it. The lending facet of REI is off your plate.
Are some brokers greedy? Yes. I'll process loans for brokers on the side and I have seen some 3 point, 4 point deals on decent size loans. We're talking 3 points on a 500k loan. 15k commission check. You only need about 10 of those in a year.
When it comes to brokering, some play the short game. Pricey, soak the borrower for any and all. Probably won't come back but you make a nice check, or be cheap. Take your one point, maybe even do the first loan for .5 points and try to earn the future business. I've seen brokers play it both ways.
- Lender · Miami Beach, FL · Member since 2026 · 9 posts · 2 votes5mo
Great question James. As a direct hard money lender, I can give you the straightforward answer: going direct will almost always save you money. Brokers typically add 1-2 points on top of whatever the lender charges, plus sometimes additional fees. When you work with a direct lender, you're cutting out that middleman cost entirely. The trade-off is that a good broker may have relationships with multiple lenders and can shop your deal around, which can be useful if your scenario is unusual. But for a standard fix and flip or rehab in CT, most experienced direct lenders can match or beat broker-sourced terms.
- Lender · Seattle, WA · Member since 2017 · 118 posts · 161 votes5mo
Quote from @James McGovern:
Is it a given that using a broker will always cost significantly more than going directly to a hard money lender?
The bridge lending space is highly saturated with thousands of lenders - many of whom offer the exact same, undifferentiated product in terms of loan structure / proceeds / general terms. If you go directly to a bridge lender (and don't shop it around) their incentive is to quote you as high of a rate / origination fee as possible without you getting wise to the fact that there are (probably) better options available to you. IE - if you go direct and don't shop to 20+ different lenders (minimum) you're likely getting your eyes ripped out on fees & rate.
If you hire a competent & seasoned mortgage broker (emphasis on competent & seasoned) then I guarantee that you will save a signficant amount in terms of both origination fees and bps on your interest rate. The broker's job to make a robust market to ensure that you - the borrower - achieve the absolute best rate, terms, and certainty of execution available relative to your goals.
There are tons of hard money lenders that would love to charge 2.00% origination fee, 15% rate, and 1.00% exit fee for a ~80-85% LTC bridge loan. They'll wine & dine you, tell you how smart you are, and pretend to be your best buddy in order to get you to sign that term sheet. You hire a mortgage broker to cut through all their B.S. and achieve the absolute best deal available. Do you pay a fee for that service? Yes. Is it worth it? If your broker is competent & seasoned - yes.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes5mo
Quote from @James McGovern:
Is it a given that using a broker will always cost significantly more than going directly to a hard money lender?
Not always - some brokers will work to get you best deal. But as others mention the market is so saturated as there is zero barrier to entry to be a broker as most require no licensing - so I say that with being careful of what type of broker you are using
7e investments53 Reviews - Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes5mo
Broker fees on hard money are where the deal eats you if you don't watch.
Here's what most investors miss.
The headline rate is the LEAST important number.
You're also paying origination points, broker fee, doc prep, underwriting, sometimes a rate buy-down.
Add it all up and a "10% money" loan can really cost you 15-18% on a 6-month flip.
Two things that actually matter.
One: ask for the APR, not the rate. APR forces them to roll the fees in.
Two: ask if the broker fee is paid by you or the lender. Some lenders pay the broker behind the scenes AND you get charged on top.. that's double-dipping.
Compare three lenders. Get the fee sheets in writing.
Hard money is a tool. Every situation has specifics, but transparent fees should be non-negotiable.
- Specialist · NJ · Member since 2022 · 1k+ posts · 650 votes5mo
A Broker should never be paid outside the HUD. If it will be paid by the lender, then the broker origination and any fees will be rolled in to their overall number. It can be hidden from the borrower totally. Lenders call this being a Correspondent Lender. They allow brokers who bring in steady business to market themselves as a lender even though they are not and since all fees are rolled into some Commercial Closing LLC the borrower never knows how much of the origination they paid goes to the broker and how much to the lender.
Some Lenders do not protect brokers and the broker fee is on the HUD going to the broker.
No one should ever pay anyone outside the HUD.
Bridge Money is a loaded gun. It's a time bomb with a ticking clock. If you are stagnent with it, misuse it, miscalculate with it, you are in a real jam.
Brokers usually charge an origination fee, and then maybe a processing fee. There shouldn't be anything other than that. How much in origination should be discussed upfront and never be sprung upon you a week from closing.
- 1dErik EstradaBusiness MemberLender · Member since 2022 · 6k+ posts · 1k+ votes
No there is usually no difference unless it is a broker to broker deal. True private money usually has a broker involved to handle the paper work, underwriting, etc.. The capital source, just fronts the money as long as the broker can present a clean deal and they usually share the interest and/or points. The capital source usually does not want to talk to a borrower nor be involved in the deal, unless it is a family friend or colleague.
A hard money lender like Kiavi is usually soft money. They still have to do their due diligence to sell the note to a large fund. It is cheaper to work with soft money directly if you fit their box and have excellent credit. If it's an out-of box deal good luck!
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