Im trying to figure out what my monthly interest payments would be on a hard money loan. Here is a mock set up:
ARV $150,000
LTV x %70
_______
$105,000
Let’s assume I borrow $105,000 at %15 for 24 months. Do I multiply:
$105,000
%15
x_______
$15,750 then
divide 24
$656.25
Is this correct?
I am not a fan of Russ Whitney and this ios in no way an endorsement for him or his investment strategies, etc., but he does have some good calculators:
http://www.russwhitney.com/Tools/calculators/SimpleLoan.html
Keith
105 x 15% / 12 = 1,300 monthly interest.
you divide by 12 months because 15% is an annual rate.
different lenders will use a different formula, dividing by 360 or 365 days using daily rates, etc. But this is a good estimate.
When I do my math and account for the holding costs in the loan as well as the construction I know I will get the money in draws. Will I be able to pay the monthly interest payments out of the draws or will I have to tweak the figures of construction/repair to make the payments.
The draws are just to pay the costs of the project as they are completed. They are used to repay you or your contractor as stages of the project are completed.
I understand how the draws work but what I meant was say the sheetrock demo and reinstallation costs $1500 I’ll say $2000 to recoup money so I don’t have to pay interest payments out of pocket. Just making the numbers work for me.
No, that is incorrect. It will be divided by 12 simply because the interest rate is annual (12 months in a year). So the first amount ($105,000 X 15% = 1312.50 +/-) that you came up with will be the amount that you would be paying back over the entire period of the loan.
You could work an interest reserve into the HML which will include money to cover the interest expense as well as hard costs of rehab etc. Of course your lender will have to approve this.
71tr,
Im not familiar with this. So “x” amount of dollar will be set in a reserve and will be automatically deducted for the monthly interest payments throughout the life of the loan.