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Understanding Hard Money Loans in California: Rates, Examples, and Licensing Requirements

Are you a real estate investor, a property developer, or a flipper in California? Do you want some financing within a week to close a real-estate deal? We offer hard money loans much more quickly than a loan through a traditional bank. We can potentially assist in financing up to 65% to 75% of the property’s current value, and offer loan terms that range from 6 months to 3 years or even more.

What is the average interest rate on a hard money loan?

The Interest rates on hard money loans are based on the terms of the loan, its purpose, property type, market condition, and the borrower’s experience. They are generally short-term loans that are ranging from 6 months to 3 years. It may sometimes extend up to 5 years. The interest rate on a hard money loan is typically higher than conventional loans! It is often ranging from 8% to 15% (or more) due to the higher risk and shorter loan duration.

• Lower Range (8% – 10%): This range is generally applicable to borrowers who possess a robust history of successful investments or to loans secured by properties with lower loan-to-value (LTV) ratios, typically at 60% or below.
• Middle Range (10% – 13%): This range is frequently associated with standard hard money loans utilized for fix-and-flip ventures that carry an average level of risk and LTV ratios approaching 70%.
• Higher Range (13% – 15% or more): This range is usually reserved for projects that are considered riskier or for borrowers with limited experience, higher LTV ratios, or loans that pertain to more specialized properties, such as single purpose commercial real estate or raw land.

What are hard money loans in California?

A hard money loan in California represents a form of short-term, asset-based financing. It is predominantly utilized for real estate investments. The property’s value is the primary factor in loan approval. Hard money lenders are more interested in the asset’s potential value and marketability than the borrower’s credit score. Hard money loans are secured by the value of the property being financed, which is known as the “hard asset.” This approach contrasts sharply with traditional bank loans, which heavily prioritize the borrower’s creditworthiness and income. Such loans are generally offered by private licensed landers or entities or individuals instead of traditional banking institutions. It is a perfect assistance for real estate investors who are engaging in fix-and-flip, bridge loans, and refinancing projects.

What is an example of a hard money lender?

A hard money lender may refer to a private lending company or an individual investor who provides short-term loans to real estate investors. They are primarily focusing on the property’s value and potential after-repair value (ARV) rather than the borrower’s credit history or financial background. Being one of the leading hard money lenders in Los Angeles, we offer quick financing solutions for investors and developers looking to acquire, renovate, or refinance residential and commercial properties.

They predominantly evaluate the worth and prospects of the property being financed. It is suitable for real estate investors who might not satisfy the stringent credit criteria set by conventional banks. Nevertheless, due to the increased risk they undertake, hard money lenders impose elevated interest rates and fees.

Do hard money lenders need to be licensed in California?

In California, hard money lenders are typically mandated to obtain a license, primarily through the California Department of Real Estate (DRE) or the Department of Financial Protection and Innovation (DFPI), which oversees non-bank lenders and mortgage brokers. The essential licenses that hard money lenders may be required to possess include:

California Real Estate Broker License: This license is the most prevalent among hard money lenders who originate loans backed by real estate. According to California law, real estate brokers are permitted to create, arrange, or service loans secured by real property.

California Financing Law (CFL) License: The CFL license, granted by the DFPI, is frequently necessary for lenders providing consumer or commercial loans that may not be secured by real estate. It is also pertinent for those offering loans for investment properties.

Residential Mortgage Lending Act (RMLA) or NMLS License: A Residential Mortgage Lending Act license may be required for hard money loans aimed at residential properties.

Furthermore, California enforces stringent usury laws that govern interest rates applicable to hard money loans. We are fully licensed at both the state and federal level.

Joe