If you are new to hard money, a few terms come up on every loan. Here is what each one means, and what it looks like at Northwest Private Lending.
Interest-only payments
A bank mortgage payment pays down principal along with interest, and often taxes and insurance. Most hard money loans are interest-only: your monthly payment covers interest, and you handle taxes and insurance yourself. At NWPL the rate is 1% per month, so a $300,000 loan has a $3,000 monthly payment. You can pay principal down at any time, and most borrowers repay in full when they sell or refinance.
Points (origination fee)
"Points" and "origination fee" mean the same thing: an upfront fee equal to a percentage of the loan. Across the industry it often runs 2% to 6%. NWPL charges 3 points, which is 3% of the loan amount, with a $2,500 minimum.
LTV (loan to value)
LTV is the loan amount divided by the property's value. A $200,000 loan on a $400,000 property is 50% LTV. Asset based lenders like NWPL set the maximum based on location, property type, condition, your plan and the type of deal. On fix and flip financing, for example, we lend up to 80% of the purchase price.
Maturity and extensions
Maturity is the date the loan comes due. NWPL business-purpose loans are generally written for 2 years, and owner-occupied loans (Oregon and Idaho only) generally for 5 years. If your loan is in good standing at maturity and you need more time, we extend it for free.
Asset-based loans
Asset based loans are secured by collateral, in our case real estate: houses, land and commercial property. That is why we can approve loans on equity instead of credit scores or tax returns, including asset based loans on primary residences in Oregon and Idaho. It is also why borrowers use us for hard money refinancing, cash-out hard money loans and bridge financing for real estate when a bank cannot move fast enough.