If you need money, one option could be a hard money loan—using real estate or property to secure your loan. It’s important to know exactly what you’re getting into because you could lose your collateral if you don’t meet repayment terms. Here are five questions to ask hard money lenders California.
- How long is the loan for?
Hard money loans are typically for short periods, usually from one year to five years. However, some lenders may offer them for just up to two years.
- What would the interest rate be, and how many points would you charge?
These loans tend to have higher interest rates than traditional loans. Never go into a loan without knowing about interest or points, which can lower your monthly payments.
- Are there fees such as origination fees?
This is a question that some people forget to ask, and they’re surprised later when their loan ends up costing more than they expected. The cost went up due to origination fees, processing fees and other fees. Keep total costs in mind when comparing lenders.
- What is the loan-to-value ratio?
Some lenders may be able to give you a LTV of up to 75 percent, especially if the real estate in question is residential rather than commercial.
- Does a prepayment penalty apply?
Lenders might “penalize” you for paying a hard money loan back early. If there is a penalty quoted and it doesn’t meet your timeline, ask about changing the number of points or about increasing the interest rate you pay to get rid of the penalty.
Other questions worth asking have to do with whether the company is a direct money lender, if there are references or testimonials from previous clients and how long the loan will take to fund.
Fortunately, many hard money lenders, such as North Coast Financial, fund quickly. Get in touch today to find out more.