What Should You Know Before Applying For A Hard Money Commercial Loan?
It was not always easy to get hard money commercial loans and nowadays the situation is quite the same. Hard money commercial loans are for those individuals who do not have enough money to start up their business.
Hard money loans have several disadvantages. Usually, such loans are provided with higher rates. The average rates in the first year of the loan are between 12 to 15%. As the loan progresses, the rates tend to increase, sometimes as much as 24%. A significantly higher monthly loan payment will be required for the loan.
There is another disadvantage of the hard money commercial loan concerning the cost of the loan. Usually, origination fees between 2-10% of the loan amount are charged by lenders. It means that on a $500,000 hard money loan, the fees can be as much as $50,000.
There are also “upfront” fees that can be charged by lenders, such fees cover the lender’s legal team. Mind that such fees have conventional commercial lenders and they also can be charged by the hard money commercial lenders during application or commitment. Upfront fees can charged both as a flat rate or as a percentage of the loan amount. Usually, the term of most commercial hard money loans are between one to three years. If you want to get a hard money commercial loan based on short term, then you should know that it can be problematic.
Hard money commercial loans are 50-60% of value. But one should say that there are hard money lenders that often use a “quick sale” value. The value can be described as the value at which the property will sell to an all-cash buyer with an exposure and marketing time of six months or less. The quick sale value of commercial property can be as much as 20% less than the actual appraised value of the property.
It is possible to apply for a hard money commercial loan via the Internet. In some ways one can say that it is one of the best ways, as you are able to get an opportunity to compare all terms and conditions of different lenders. And then you can make a decision which lender to choose, but never be in a hurry. The main consideration in taking a hard money commercial loan is whether it would generate enough money to comfortably service the borrowing.
Related posts:
