ARE THERE ANY UP-FRONT FEES PRIOR TO FUNDING?
Like any conventional lender, hard money lenders do charge a loan fee prior to funding.
This fee is measure in "points" - one point is equivalent to one percent of the loan value. The number of points could depend on the complexity of your loan, and the agreement you reach with your lender.
Depending on your lender and the nature of your loan, you may be subject to the following fees:
Appraisal fees go through your lender to the appraiser
Credit Report Fees
Credit report fees also pass through the lender, to cover the cost of the credit report.
The underwriting fee is a set dollar amount that goes directly to the hard money lender to cover the process of underwriting the loan. The underwriting fee may range from $750-$2,500.
Document Preparation Fee
If your lender outsources document preparation to a third-party company, the document preparation fee may pass through the lender as well. Other companies prepare their documents in-house.
It’s common for hard money lenders to refer clients to a different lender when they feel the other lender is more suited to handling a particular loan. In this case, you may be subject to a referral fee which will go to the original lender.
Servicing fees can be set as a percentage of the loan value, or as a flat rate that is paid month-to-month.
Late Fee Income
It’s important for borrowers to adhere to the fee schedule originally set in the promissory note to avoid incurring late fees.
If your hard money loan matures and you can’t pay it back, your lender might be willing to let you renew the loan for a renewal fee. In addition to the renewal fee, you also may need to pay additional points as well as cover the costs of a new round of documents.
Be Prepared: Consult with Your Lender
Have a thorough dialogue with your lender about all the fees that may be incurred throughout the process of a hard money loan, to avoid any surprises or unexpected fees. A reputable lender is going to be up-front about the schedule of fees, and working with the same lender over the course of several real estate projects can help you understand the system and build a foundation of knowledge and trust.
If you’re ready to set your project in motion with a hard money loan, contact a Socotra representative to begin evaluating your project. Socotra Capital is California and Nevada’s premier hard money lender for your real estate investment needs.