Private Money Earnings Beyond Interest

Are you interested in learning more about hard money earnings beyond interest? For example, did you know private lenders also earn money from loan fees? The interest charged to the borrower for using the funds is the most typical source of earnings for a private or hard money loan investment. However, other possible revenue streams and methods to arrange loan agreements might result in a higher return than the interest rate listed on the promissory note. In addition, loan fees and deal structure can impact the return on investment in a hard money note.

Fees

Fees might be applied up front, upon loan origination, or over the life of the loan. The following are standard fees in which investors participate:

Points

The borrower pays points on a private money loan as part of their closing loan fees. As a yield improvement, it is usual for an investor to want .5% to 1% of the loan total.

Underwriting Loan Fees

A loan doc or underwriting fee is charged to the borrower to draw up the necessary legal agreements for the transaction. This closing expense can vary in price depending on the complexity.

To read more articles on Private Lending Fees Beyond Interest, check out Liquid Logics Blog.

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