An 18% rate is normal in this business. This high rate usually discourages a lot of investors from tapping this form of financing.
What neophyte investors do not know is that this rate will hardly matter. Remember, flipping houses is a fast paced form of investing. You need access to cash, fast.
If you go to traditional loans, you must wait for around 30 days for the processing of your loan.
By that time, some other house flipper could have snatched the fixer upper you want to rehab.
The first thing I do is thoroughly check out the company and its principles. I have found several ways to qualify a hard money lender's reputation.
In addition to the traditional methods such as pulling a Dun and Bradstreet report, I actually call their competition and ask some very pointed questions.
In some cases, the low loan to values do not facilitate a loan sufficient to pay off the existing mortgage lender, in order for the hard money lender to be in first lien position.
Because a security interest in the property is the basis of making a hard money loan, the lender usually always requires first lien position of the property.
As an alternative to a potential shortage of equity beneath the minimum lender Loan To Value guidelines, many hard money lender programs will allow a "Cross Lien" on another of the borrowers properties.
The cross collateralization of more than one property on a hard money loan transaction, is also referred to as a "blanket mortgage". Not all homeowners have additional property to cross collateralize.
Cross collateralizing or blanket loans are more frequently used with investors on Commercial Hard Money Loan programs.