Obviously, it’s important to develop a good relationship with any Arizona Private Money Lenders you work with, but you also want to keep your fees as low as possible too. Use these tried-and-true methods to reduce your costs when you go for your next loan.
Before getting into how to reduce fees, it’s important to understand what types of fees Arizona Private Money Lenders charge. To begin with, each loan will have an interest rate and points. The interest rate is straightforward. You’ll pay a percentage of the loan to borrow the cash, just as you would with any other loan. However, in this case, you’ll probably make interest-only payments until the term ends, and then you’ll pay the principal.
In addition to this, you’ll also see points, which are common with this form of lending and also with traditional mortgages. These are sometimes called “up front points” because you pay them with your closing costs. Each point is equal to 1% of your loan. Generally speaking, the riskier it is for an investor to finance you, the more points your loan will have. However, other things may come into play too, like what region you’re operating in and how much competition there is for the investor.
After points and interest, additional fees will vary based upon the investor. Although not all will charge these fees, a few common ones include an underwriting fee, processing fee, and doc prep fee. You may see referral fees and loan servicing fees as well.
You’ll want to watch for fees which could emerge later in the deal too. For example, it’s common to see late fees, foreclosure fees, and renewal fees listed on the paperwork. Although you may never have to pay these fees, provided you make your payments on time and can pay off the balance of the loan before the term is up, it’s a good idea to be aware of what you could be charged should issues arise.
When You Create a Win-Win Solution, Your Fees Will Be Less
One of the biggest things you can do to keep your costs low is to reduce risk for your Arizona Private Money Lenders. Bear in mind, this is an industry that’s not particularly concerned with your credit, but with how solid the deal, itself, looks. Than means keeping the loan-to-value (LTV) low. You can do this by putting more of your own money into the project or by finding a screaming deal on a property. There’s also reduced risk when financing people who are experienced in the biz. If you’re a flipper, expect to pay more the first few times or bring someone who has several successful flips on board. The same is true if you’re in construction, doing fix-and-holds, or are in virtually any industry.
Talk with a few companies, so you’ll know the real deal when you see it.
On a final note, some companies simply price themselves more competitively. Gather rates from a couple different companies and be sure to ask which fees are part of their packages. That way, you can compare apples to apples—you won’t think you’re paying lower rates just because the interest is lower or there are fewer points, but can tally up the whole cost to borrow money. From there, it’ll be easier to identify which Arizona Private Money Lenders have the best rates overall, so you can keep more money in your pockets.
Dennis Dahlberg
Broker/RI/CEO/MLO
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.
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