How Much is Interest on a Hard Money Loan?
When you’re considering a hard money loan, one of your first questions will probably be, “How much is interest on a hard money loan?”
That’s a great question – but unfortunately, it’s not an incredibly simple answer.
Here’s what you need to know.
How Much is Interest on a Hard Money Loan?
The interest rates different hard money lenders quote you will vary. They might vary a lot – and that’s because different hard money lenders look at different factors when they’re thinking about taking on the risk of letting you borrow their money.
Hard money loans are privately funded. There’s no huge reserve of cash like a conventional lender (like your bank or credit union) has access to. Hard money lenders take on personal risk, so the interest rates with this type of loan will be higher than they would if you were borrowing from a bank or credit union.
Interest rates on hard money loans, as a general rule, run between 9 and 15 percent. It really depends on the lender and how much the perceived risk is, as well as what the loan-to-value ratio is on the transaction.
What is a Loan-to-Value Ratio?
Hard money lenders determine how much they can lend based on the ratio of the loan amount to the value of the property. It’s known as the loan-to-value ratio, or LTV. Many hard money lenders let you borrow money based on a house’s after-repair value, or ARV.
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