Whether you are working with a private money lender in Texas or a California Private Money Lender, there will be things that you will want to consider before committing to anything.
Any financing option is going to come with certain clauses, regulations, and/or requirements that a borrower should familiarize themselves with before pursuing the option. For instance, when someone in Los Angeles hunts down a California Private Money Lender so he can get his reality show off the ground, he will need to be prepared for certain things.
Since it is a private money loan, the interest rate will be a lot higher. It is the tradeoff you have to accept to get the money sooner rather than later and because of less than desirable credit. It’s the cost that everyone expects when they apply for a private money loan.
But it isn’t the only cost.
Beware The Cost Of Working With A California Private Money Lender
Like private money lenders everywhere, there will be cost borrowers will have to handle when they apply for a California Private Money loan. Those costs can be categorized as up-front, interim, and renewal:
Up-Front: when you apply for a private money loan you will have to deal with certain costs as part of the application process. Points are basically compensation to the lender for just getting the ball rolling. A borrower may also have to pay a referral fee to whoever pointed them in the right direction. Since the loan documents are typically not cut and dry, the processing, document prep, and other fees may be a little higher as well.
Interim: throughout the life of the loan there will be certain costs a borrower will have to pay along the way like interest, amortization, late fees, and taxes and insurance costs. Should a borrower become delinquent, the lender can advance against the loan to cover the costs of appraisals, unpaid taxes, foreclosure fees or legal fees.
Renewal Costs: it is not unusual for a California Private Money loan to include a massive balloon payment at the end of the loan’s term. If the borrower can’t pay it they may request a renewal. In doing so, they will likely have to give up more points up front as well as cover closing costs and any expenses related to document preparation.
The Truth About Private Money
There is money to be made in financing, which is why so many companies exist for the sole purpose of providing people with the financing option of their dreams. While it all may seem magnanimous at the time, the cold, hard truth is the lender doesn’t care about the borrower or his/her dreams. They know you can’t get a loan elsewhere and have no choice but to turn to them.
So what do they do? They do like any good business person would—they take advantage of the borrower’s necessity and charge accordingly.
Dennis Dahlberg Broker/RI/CEO/MLO
Level 4 Funding LLC
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
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 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.