To purchase my first residential pre-foreclosure l have been pre-approved for a hard money loan. Is it wise to deal with a hard money lender at 15% interest with points on both ends? Also, is it realistic to be able to obtain hard money with no money down and interest only mortgage payments? If no, what type of financing would you recommend? Also, how is hard money dished out to you for repairs? Do they pay contractors directly or must you pay initially and present a receipt to the lender for reimbursement? If someone could please let me know their experiences regarding any one of these questions I will greatly appreciate it. Thank you.
Hello,
You have a few questions there that require some long answers. I routinely get hard money lenders and the only way I agree to the rates you are paying is that it costs me nothing to get in.
The other rule I make for myself is that the property have a Loan to Value ratio of 65% or less and my anticipated holding time on the property is less than six months.
I do think that 15% is high, but I find my own private investors and I negotiate terms with these people. If I pay a higher interest rate, I will pay very low or no “points” to the lender.
Typically when you borrow money froma private lender they do not hold back funds. However if you are new and they are concerned that the repairs you are planning to do will not get done, they may ask you to work some kind of construction draw.
I would let a third party, like a title company or attorney handle any funds that must be partially distributed due to a construction draw. Just make sure your profit is there to justify the cost of the money you are borrowing.
I hope this helps some. Take care and God bless.
Clyde G.
Lake Mary, FL
Why did you go to a hard money lender?
Is it wise to deal with a hard money lender at 15% interest with points on both ends?
Well it is wise if the deal needs major rehab work thus you cant’t get a conventional loan, NOT wise if you could get a regular conventional loan on it
[color=Black]Also, is it realistic to be able to obtain hard money with no money down and interest only mortgage payments?[/color]
Yes it is realistic, there is a lot of competition in this HML and Private investor arena. Most if not all HML do interest only payments and some you could even roll in to the loan and have no payments
[color=Black]Also, how is hard money dished out to you for repairs? Do they pay contractors directly or must you pay initially and present a receipt to the lender for reimbursement?[/color]
It just depends on the HML they could escow the money and do draws when certain amount of work is done or they escow the full amount and reimbuse you for it .
If you deal with private investors then you may just get the whole chunk of changesome HML do this also but not very many.
15% with points at both ends?
Bend me over.
you make me laugh Jason
You have a good sence of humor ;D
Your name escapes me
or is it a freudian slip? ;D
Sigmund Freud
not Frued. Funny.
the father of psychoanalysis.
and you spelled his name wrong.
I did it on purpose to see if you were paying attention 
Thanks to all who have responded. I have since received the HML and am closing on the property. I have contractors lined up at great rates as well as several interested buyers. The loan is at 13% interest with 2 points on the back and the interest only payments are rolled into the mortgage ( so no monthly payments ). This was a great deal so I have a lot of room for error. Hopefully I won’t need it.
Thanks again for the advice,
Chris Y
Short Hills, NJ
That is more like it Chris :bigok:
What LTV did you get?
I received 65% LTV ratio on that HML loan. I have another deal that I would like to do, but I need a rehab loan on a property that is selling for 350K and needs repairs up to about 60,000 dollars. Comparables on the same street without a pool ( this has a pool ) have sold for 480 to 530K. I am searching for financing now. Thanks again to all who have been responding.
Chris
He bought a place a 65% LTV which the CREAM and surgar of a deal
THAT IS WHY I AM CONGRATULATING HIM
I have gotten hard money to get into projects as well. Then what I did was get a conventional loan. On my last deal, I got 80% of the appraised value to complete the rehab and pay off the HML. They even said that if got a second home, and they said they would lend 90% of the after rehabed appraised value for the home or they would allow me to build it using the appraised value as if it had been built today. It worked for me, better interest rates. After working with the lender, I have found that there are lenders who offer conventional financing (avoid the HML fees) and you can go stated or don’t document your income. There are so many options available to us as investors. Ask around, and you will find it. Best of luck in all you do and keep all of us informed so we can invest in some of these markets as well.
Yes
exactly I use this technique too just tohave the hard moeny6 lender do a short term loan give a break because it would be such a short term and Get a NO SEASONING CASH OUT LOAN