Hard Money Interest Rates Explained

Hard Money Interest Rates Explained


Let’s say you’re getting a hard
money loan and the lender quotes you an interest rate between 12 to 14 percent. Whoah! That sounds insane doesn’t it? Insanely high when right now in the market the average interest rate from a bank is going to be four to six percent. We’re talking 12 to 14 percent folks. That’s double digit interest rates
right? Now let me explain to you how hard many interest rates
actually work. Most of the loans that you’re
getting from a hard money lender are going to be very
short term in nature. Somewhere between one month to 12 months. So let’s say you only have that loan for four months. You’re buying a property. You’re fixing it up and some at some point in the future four to six months down the road
you’re going to resell that property. So let’s say you have this hard
money loan for four months and the interest rate is 12 percent. How do you figure that out? That’s 4 percent not 12 percent, 4 percent. So how do you figure that out? You take 12 percent. That’s your annualized interest rate and you divide it by 12 months that’s going to give you 1 percent a
month, if you hold the loan for four months. That’s 1 percent a month. That’s 4 percent, not 12 percent. So hard money low interest rates aren’t as high as they seem to be. Sophisticated real estate investors
know how to use hard money lenders to make more money. To make more money in their
investments by getting these loans paid off in four to six months. To walk away with an interest rate that’s
actually 4 to 6 percent. That’s on par with what banks are charging. If you like this video please like
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comment section below. Thanks for watching.

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