Hard Money Loans – Today’s Terms

In today’s economy borrowers and lenders alike approach transactions with much more caution than they have over the past several years. Borrowers want to know that their project will be able to service the debt, especially should the economic conditions continue to worsen. Lenders want to know that property values are sustainable and that borrowers are credit worthy.

Even equity driven lenders are now taking a closer look at a borrowers credit in assessing loan approval and loan terms. Below is a comparison of how hard money loan terms have changed over the past year:

1. Annual Percentage Rate: from a median 8.5% to 12% (some now charge as high as 18%APR).

2. Points: 3% to 6% (some charge as much as 10%).

3. Prepayment Penalty: Still most hard money lenders will not charge a prepayment penalty, but some now charge up to 1%.

4. Term: Still some hard money lenders will extend terms up to 60 months.

5. Loan-to-Value Ratio: from 65% to 40%.  This criteria has experienced the biggest change over the past year.  Some hard money lenders will go as high as 70% in some cases.

6. Geographic Location of Property: while there are still many hard money lenders that will extend loans nationally, many hard money lenders have now become more geograpically niched, since they better understand the dynamics of their chosen market area.

7. Loan Amount: no change in the amounts hard money lenders will lend generally between $250,000 to $5,000,000.

With these changes in loan criteria and terms borrowers should approach their projects with caution and analyze their opportunities with care to determine whether or not a hard money loan will help them meet their financial objectives, not just in the short-term, but also in the long term.

Jim McCune

Spectracom Holdings

Tel: 877-660-2895

Email: jim@spectracomholdings.com

Website: www.SpectracomHoldings.com

Professional Profile on LinkedIn.com: http://www.linkedin.com/pub/12/a54/1a4

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