Commercial Hard Money Loan Interest Rates
Jul 27, 2016
For anyone getting a commercial loan, looking for the lowest interest rate is an understandable pursuit. However, different circumstances and property types will affect the interest rate a borrower can get. Here is a how you can understand your options and reasons behind Commercial Hard Money loan interest rates.
Like any type of loan, the prospective interest rate is of great concern to borrowers looking to secure a hard money loan. For those who are accustomed to the advertised interest rates of banks, which can fall as low as 3 percent or 4 percent, there can be a degree of shock for borrowers who find themselves facing interest rates of 10 percent to 20 percent. Understanding how the hard money loan interest rate works and where lenders calculate their numbers from can help brokers and borrowers come to an agreement for the advancement of everyone involved in the loan.
How the Lender Determines Interest Rate
A hard money lender will typically base the majority of their loan terms upon the value of the real estate being used to secure the loan, while banks require reviewing the likelihood of the borrower being able to pay back the loan, such as with a credit history check. A hard money lender will determine the appropriate interest rate based on the former.
Interest rates on hard money loans are typically higher than other types of loans because of the risks incurred by the lenders and because of the shorter loan term. The lenders do not have the checks and securities of a bank. Most hard money loans will range from 6 months to a few years.
Paying Back the Hard Money Loan Interest
Since the loan term tends to be short on a hard money loan, there is limited time for interest to accrue. Interest on the loan is paid monthly with the entire balance due at the maturity of the loan. interest only loans that the interest is paid up front and principal at maturity. Some lenders do not have a fee associated with paying the loan off early. Hard money lenders also tend to be eager to work with borrowers to find ways to pay back the money rather than move into foreclosure. This might entail charging late fees or extending the term of the loan to ensure that people have the chance to repay.
Securing a bridge loan is an excellent way to free up your capital for a number of different projects. Although the interest rates might be considerably higher than the rates found on other types of loans, such as traditional bank loans, the loans offer borrowers many benefits as well. Since the lender can offer the loan in just a few days after the request and requires less documentation, thanks to the higher emphasis on assets than credit score, borrowers can secure their money faster.
The trade-off is the higher interest. As borrowers understand these nuances, they are better able to communicate with their lenders and find a good deal. Those interested in securing a hard money loan should speak with their local hard money lender.
If You Need a Commercial Hard Money Loan, Riverdale Can Help
If you’re considering a hard money loan, then contact us at Riverdale Funding. We are leaders in hard money loans with over management team having over 35 years experience in the real estate and mortgage industries.