Points and rates in the hard money world can seem arbitrary and mysterious. Let’s demystify them and look at how Arizona Hard Money Lenders determine them.
Interest rates, while mysterious in their own way, are at least somewhat understandable for the layperson, but points can be a little more confusing, so let’s break down what they are before we get started. Simply put, points are a percentage of the amount being borrowed that the lender charges to close on the loan. For instance, 2 points on a $100,000 hard money loan would be $2,000. Just like the interest rates, the points you’ll be charged are based on one overarching factor — risk.
Let’s take a look at risk and some of the factors that lenders use to determine risk. Namely, exit strategy, experience, and equity.
How Hard Money Lenders Determine Risk
- The experience of the borrower. If you are borrowing to do a fix and flip, a spec home or any new construction, the lender will take a look at how much experience you have. If this is your first time trying your hand at it, the lender might see that as a bigger risk than someone who’s successfully flipped 10 homes in the same area.
- The equity of the property. This is especially important if the property is being put up as collateral to secure the loan. If you come to the Arizona Hard Money Lender with solid, verifiable figures on the property’s worth and, more importantly, its future worth, you might be able to negotiate lower points and rates.
- Your exit strategy. This might be the most important factor. Arizona Hard Money Loans are like mortgages; they’re meant to be quick and have a specific end date. Luckily, you’re both pushing in the same direction on this one. Both you and the lender want to be able to sell the spec home or flip for a profit within a set period of time. Come to the table with a realistic plan for finishing the project and selling within a reasonable time frame and your rates might reflect that.
Amazing Rates from Arizona Hard Money Lenders
Equipped with this knowledge, you can come to your Arizona Hard Money Lender well-prepared. Here at Level 4 Funding, we have loans with fixed rates of 5.99% and some loans with absolutely no points, plus flexible terms from 3 to 60 months. Ready to see the great rates you can get on a hard money loan? Contact us today to find out!
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About: 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.
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