By Broker, Forest Tardibuono
Hard Money Math
The lending choices for Buyers in this market have been simplified. There are “A” paper lenders for Buyers who have really great credit, verifiable income and verifiable cash to close the transaction. Next are Hard Money lenders, who require a good down payment and an ability to repay the loan.
There is really nothing in between. So it really compels real estate brokers and agents as well as Buyers to become familiar with what Hard Money is all about.
Hard Money is very simple mathematically.
Here is an example assuming a purchase price of $200,000.
The “good down payment” mentioned above would be a minimum of 30%. There are occasions where 25% will work but for this example we will use 30% as a down payment. On a $200,000 purchase price that would be $60,000.
That would leave you with a loan amount of $140,000. For a Hard Money loan payment you need to multiply the interest rate offered for your profile as a Buyer, times the loan amount to get how much interest you will pay per year. Then divide it by 12 months to get the monthly payment. For this example, here is what it would look like with a *10.50% interest only loan for $140,000. That’s $140,000 X 10.50% = $14,700. Divide this by 12. $14,700 ÷ 12 months = $1,225 per month.
Please note that the 10.50% rate mentioned above applies in my office and can be higher or lower depending on the down payment, loan size, property, property location, occupancy type, etc.
Hard Money is here to stay and is a vital tool for the busy realtor and for Buyers who have tried the “A” paper route and been turned down. 2/3 of the loans I do are for purchases. The Buyers are so grateful too, as they thought they had no chance for home ownership.
I invite you to call your local Hard Money Broker and really get the further scoop on what Hard Money is all about. It is the only loan program I now offer. After 25 years of doing this, I know of which I speak.
Forest Tardibuono- the Guy in the White Hat – is a CA DRE Broker with 25 years of experience in real estate and lending. His phone number is (707) 523-2099. See website @ www.sunpacmortgage.com.