Calculating the Actual Cost of a Hard Money Loan

Calculating the Actual Cost of a Hard Money Loan

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Hard money lenders in Los Angeles

If you are interested in securing a hard money loan, it is important to go into the process with your eyes open and a proper understanding of the actual cost associated with this type of loan.

A hard money loan is generally one of the quickest and most efficient mechanisms you can utilize to finance a fix-and-flip in or around Los Angeles. In addition, a hard money loan is typically approved or denied primarily on the basis of the property’s value, as opposed to the personal portfolio or credit score of the borrower. Though, it is true that hard money loans generally tend to be more expensive when compared to traditional financing through a bank or other financial institution. Hence,  it is important to understand the potential loan amount, the upfront costs involved, ongoing interest charges and total costs of servicing the loan for a term of weeks, months, etc.

Calculating the Cost

There are specific costs you should understand when pursuing a hard money loan, including: the amount needed to purchase the property, the “after repaired” value of the property, the costs necessary to repair the property, the lender’s expected loan-to-value ratio, the interest rate, the term of the hard money loan, and any upfront points and fees.

Purchase Price

It is extremely important to figure out the purchase price for actually buy the property. If you do not have an actual purchase price, do the necessary research to determine the anticipated or expected purchase price. Once the purchase price is calculated, do the legwork to then figure out the “after repaired” value of the property to ensure it makes economic sense to pursue a hard money loan for the project.

Term of Loan

Typically, a hard money loan is shorter in length (routinely a month or two). However, there are instances when the term of a hard money loan could be six months, ten months, or even more than a year. The term of the loan will greatly impact the overall cost of securing the loan.

Interest Rate  

It is important to understand that hard money lenders in Los Angeles do not charge prevailing mortgage rates and the interest rates are generally higher to secure a hard money loan (since they are shorter in length, are riskier, etc.). Once the interest rate is determined, you can use it to calculate the overall cost of the loan. 

Points and Loan Origination Fees

Points are a form of prepaid interest. Each point typically represents 1 percent of the loan amount. Obviously, the more points, the higher the overall cost of the loan.

Looking for Hard Money Loans in Los Angeles? Take Action and Contact PB Financial Group Today

If you have your eye on a valuable piece of property or home that can be flipped for profit, do not let a lack of funds hold you back. Consider contacting a highly reputable hard money lender in Los Angeles[l9]  such as PB Financial Group. The professional hard money experts at PB Financial have helped over 2000 clients thus far and can do the same for you. For further information or to schedule a consultation please contact PB Financial Group at 877.700.3703 or visit www.CalHardMoney.com to learn more.

PB Financial NMLS #357614/DRE #01522495

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Pouyan Broukhim

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