Costs Associated With Private Money

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Costs Associated with Private Money

Private money loans can seem intimidating, especially when considering the muddy reputation hard money lenders have imposed upon even the most reputable lenders. One might wonder what costs may be hiding beneath the exciting promise of quick and easy financing.

With Not So Hard MoneyTM loans, though, you have no need to fear fees are lurking in the shadows. Yes, there are costs associated with private money loans, Not So Hard MoneyTM loans included, but we make those costs known to you upfront so that you know exactly what you’re diving into before signing any contracts.

Upfront Costs- (Prior to closing or at closing)

Some upfront costs typical to private money loans include a small deposit, that is often refundable, as well as any due diligence fees such as appraisal, environmental reports or testing and inspections.

Lender fees essentially compensate lenders for originating a loan. Only two of our Not So Hard MoneyTM loan programs require origination fees.

Referral fees are used to compensate others who may have referred you to the lender. These fees are not included in the lender fees but are fairly minimal.

Property appraisals are also to be covered by the borrower and run between $2-2.5k with Not So Hard MoneyTM loans.

Interim Costs- (After closing)

Private money loan interim costs, or costs that occur during the loan term, include interest, amortization, late fees, and exit fees.

Interest is a predetermined percentage of the loan to be paid to the lender on top of the principal for the use of the money. Not So Hard MoneyTM interest rates range from 7.99-9.99%.

Amortization is the repayment schedule of the principal over the term of the loan. The amount of this varies per loan due to varying loan amounts and loan terms.

Late fees, thankfully, can be avoided simply by ensuring payments are made on time! A sure way to escape any late fees is by setting up recurring payments through your bank account or, if possible, making payments ahead of schedule.

Finally, exit fees are similar to prepayment penalties, except the fee is owed when the loan pays off, regardless of whether the loan is paid off early, exactly on time, or late. Only one of Not So Hard MoneyTM’s loan programs has an exit fee, and that fee is still fairly low.

Private money, when researched and understood, is not the shady risk that Hollywood and Netflix sometimes make it out to be. Rather, it is a smart and preferable solution for many borrowers, especially if the letterhead on the loan documents reads “Not So Hard MoneyTM.”

Annie Allen

About the author: Annie is a student at Brigham Young University, an entrepreneur, and an avid ice cream eater. She has happily been a team member at American Life Financial for two years now and loves learning about the ins and outs of real estate and lending, as well as the economics that affects the real estate market today.