Points and rates in the hard money world aren’t regulated, so Texas Hard Money Loans set them themselves. Here we’ll look at how they determine rates and points, and what you can do to get the numbers on your side.
Most people understand interest rates, but points can be a little tougher to pin down, so before we get started, let’s look at what points are. It’s fairly simple — points are a percentage of the loan the lender charges to close on the loan. They typically range between 2% and 10% and they’re determined by the same thing that the interest rates are usually determined by — risk.
Let’s unpack that concept of risk and break it down into three factors — equity, borrower experience and exit strategy.
Some of the Ways in Which Colorado Hard Money Loans Determine Risk
- Equity. The property’s equity plays a big role in rates and points. If the property is being put up as collateral, the lender wants to know exactly how much it’s worth and, sometimes more importantly, how much it might be worth in the future. Being able to show solid evidence of a property’s equity may be able to help you secure a lower rate.
- Borrower experience. This is especially important when it comes to fix-and-flips. If this is your first time wading into those waters, a Texas Hard Money Lender may see higher risk and thus ask for a higher reward. Conversely, if you’ve flipped 10 homes successfully, there’s less risk for the lender and you may be able to negotiate lower rates.
- Exit strategy. In the end, this is what it’s all about. You want to pay off the loan with your profits and the lender wants to have the loan paid off. That’s why going into it, you should have a solid plan for getting out. A fix-and-flipper might have a rehab plan backed by contractor estimates that says they can do all the work in three months and then put the home on the market. With this, the lender knows that the money will probably be at risk for a shorter period of time and he or she may be able to offer lower rates.
Getting Great Rates from an Arizona Hard Money Lender
At Level 4 Funding, we have fixed-rate APRs as low as 5.99% and flexible terms from 3 to 60 months on a wide range of loans, including fix-and-flip, construction, cash out and rental property. Want to see what rates you can get? Give us a call today!
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.