Hard Money Loan Interest Rates

Hard Money Loan Interest Rates Today (2024)

Hard money loan interest rates today are higher compared to the lows seen in 2020-2022. While conventional interest rates have tripled in some cases, hard money loan interest rates have only increased marginally. Hard money loan interest rates today are currently in the range of 9.5-12% for a 1^st position loan. 2^nd position hard money loan interest rates range from 12-14%.

Hard Money Loan Rates California

Hard money loan rates in California are typically lower than hard money interest rates found in other states. This is because there are many hard money lenders in California and the increased competition results in lower interest rates. California is also typically considered a relatively strong real estate market which can reduce the perceived risk of funding hard money loans within the state.

Hard Money Lenders Interest Rates

What factors influence hard money loan interest rates?

Several factors impact hard money loan interest rates such as the borrower’s credit, the condition of the property and location, the loan to value (LTV) ratio being requested, and the lender’s assessment of the perceived risk of the loan scenario. The riskier the borrower or loan scenario, the higher the interest rate is likely to be.

Borrower’s Risk Profile: Lenders assess the risk associated with the borrower, including credit history, financial stability, and experience in real estate investments. Riskier borrowers typically face higher interest rates.

Property Location and Condition: The location and condition of the property used as collateral can impact interest rates. Properties in desirable locations or those in good condition are seen as less risky and may qualify for lower rates.

Loan-to-Value (LTV) Ratio: The LTV ratio, which compares the loan amount to the property’s appraised value, plays a significant role. A lower LTV ratio may result in a lower interest rate, as it means the property provides more security for the loan.

Loan Term: Short-term loans often have higher interest rates than longer-term loans. Lenders may charge more for the convenience and quick funding associated with hard money loans.

Market Conditions: Economic and market conditions can impact hard money loan rates. Lenders may adjust their rates in response to changes in the lending environment.

Lender’s Assessment: Each hard money lender may have their own underwriting criteria and assessment process. They might consider other factors such as the potential profitability of the real estate project and their own business model when determining interest rates.

How do hard money loan interest rates compare to traditional bank loan rates?

Hard money loan interest rates are higher than traditional bank loan rates. Traditional banks can offer lower interest rates because they have stricter lending criteria and access to lower-cost funds. Hard money lenders charge higher rates because they can lend to borrowers in situations who may not qualify for bank loans due to credit issues or the unique nature of their real estate projects.

What’s the impact of credit score on hard money loan interest rates?

Credit scores can influence hard money loan interest rates, but they are typically not as critical as they are for traditional bank loans. Hard money lenders are more focused on the value and potential of the property being used as collateral. While a low credit score may result in a higher interest rate or more stringent terms, it is often possible to secure a hard money loan even with a less-than-perfect credit history if the property and the project make sense to the lender.

If the exit strategy for the short-term hard money loan is long-term traditional loan the hard money lender will be more concerned with the borrower’s credit score.