Borrowers are often required to consider every advantage and disadvantage of loans, especially those from hard money lenders. If you are considering a hard money loan, be sure to ask the following questions when speaking with a potential lender.
1. What is the Interest Rate?
When dealing with hard money lenders, borrowers should certainly inquire about interest rates. Some companies will offer lower interest rates than others and a borrower’s ultimate goal should be to select the lender offering the lowest rate and best repayment terms.
2. Do You Have References?
Potential borrowers should never be afraid to ask for references, and reputable lenders should never be afraid to provide them. If a lender doesn’t have direct references, borrowers should read online reviews and testimonials from the lender’s previous clients.
3. How Long is the Repayment Term?
Hard money loans are generally a short-term solution, but some loans may offer longer terms than others.
4. Are You Licensed?
Before signing a loan agreement, borrowers should be sure the lender they choose is properly licensed by the state they do business in. Most states have online databases members of the public can use to look up a lender’s real estate license ID.
5. How Much Experience Do You Have?
It is always advantageous to work with an experienced hard money lender, so don’t hesitate to ask how much experience a lender has before accepting a loan.
6. Is There a Prepayment Penalty?
Many hard money loans charge an additional fee if a borrower opts to pay off a loan earlier than planned. This is known as a prepayment penalty, and borrowers who intend to pay off a loan before the final payoff date should definitely ask if the loan they are being offered has a prepayment penalty.
7. Are There Any Additional Fees?
Many lenders charge multiple fees which can add up in the long run. Always ask about fees and keep them in mind when calculating the overall loan cost.
Reach out to a North Coast Financial professional today to get all your hard money loan questions answered.