Woman calculating possible lending after learning how much hard money lenders charge with a percentage sign in front.

You’ve found an investment property that you want to make a move on. You have the vision, and now you just need the funding. One of the most convenient methods of real estate funding is through hard
money lenders, but you might be wondering how much do hard
money lenders charge. The answer is it depends on several factors,
so keep reading to learn what to expect so you can get funded and
start investing!

Interest Rates

Just like a conventional loan, hard money lenders charge interest to make a return on their investment. Rates vary, starting at 7% but are more typically 10% depending on several criteria we use for screening.

Upfront Points

Also known as origination points, the lender charges upfront points to cover the costs of loan-related administration. The amount of points paid varies depending on the loan amount and is calculated as a percentage. The percentage is typically around 2% to 5%.

Down Payment

While technically a down payment isn’t a fee that lenders charge, we should note that most hard money lenders require a down payment from the borrower. Like the interest rate and upfront points, the amount varies contingent on multiple factors, but we recommend having 20% available/ for a down payment.

Hard Money Loan Vs. Conventional Loan

After learning how much hard money lenders charge, you may wonder why you wouldn’t take out a conventional loan. The answer is hard money loans offer remarkable convenience.

Faster Closing Time

For example, on average, a conventional loan takes 30 days to close, while many hard money lenders can close in one to two weeks. At  HouseMax Funding, we always aim to close in 10 days or less.

That means you have cash in hand quickly, giving you the advantage against other potential investors.

Easier Application Process

If you’ve ever been through conventional loan underwriting, you know that the process seems like an FBI investigation. Banks want to know everything about your life, including your credit score, how long you’ve had your job, and your debt-to-income ratio, just to name a few. Hard money lenders do not require documentation on income and job history. We focus more on experience, liquidity on hand, and credit score and history. 

That means if you want to start investing in real estate, you can likely say goodbye to your dreams if you have a few bad marks on your credit report. What’s more, if you’re a part of the growing gig economy working as a contractor or an entrepreneur, you’ll have to go above and beyond to prove you have dependable income.

Hard money lenders are more forgiving regarding lower credit scores, though a lower credit score may result in a higher interest rate or origination points. The most significant consideration is the value of the asset you secure with the loan. Hard money lenders want to see numbers that make sense. What’s more, we love working with entrepreneurs and contractors who forge their own paths in life instead of making them jump through hoops to get funding.

Why Do Hard Money Loans Have Higher Interest Rates?

By streamlining the loan process and funding projects whose success depends on many contingencies, hard money lenders take on significantly more risk than conventional lenders. Higher interest rates are the hard money lender’s way of covering their assets.

Is A Hard Money Loan Worth It

Some would-be investors who find out how much hard money lenders charge start to wonder if the higher rates are worth it. The only person who can answer that question is you, but there are a few things to consider when deciding whether you’d like to move forward.

  1. Do the numbers work out? If your projections (based on due diligence) indicate cash flow or the proper return, it’s likely the end result is worth the price of entry. (Here is a hard money loan cost calculator that can help you crunch numbers.)
  2. What is the cost of not funding your project? If you’ve been sitting on the sidelines of the real estate investing world wondering how to get started, we encourage you to find a way to take action, whether through hard money lending or other means.
  3. Do you have the initial capital? If you can provide the down payment and pay origination fees without causing undue financial stress for yourself, you are in an excellent position to consider a hard money loan.

Getting Started With Your Hard Money
Loan Application

At HouseMax Funding, we’re passionate about helping real estate investors of all skill levels and backgrounds turn their dream of real estate wealth into a reality. We understand that applying for a hard money loan can be daunting, which is why we’re here to answer any of your questions and walk you through the process.

We fund renovations, fix and flips, short- and long-term rental properties, construction, and commercial. Contact us online or call us at 512-551-0727 to learn more or apply.