If you are new to real estate investing, a mortgage rate in "the teens" may scare you. Ironically, however, if you plan on holding a property just long enough to repair and sell it, then one of our "hard equity" loans may very well be the least expensive way to go. Consider the following illustration:
WHO SAYS BANK FINANCING IS LESS EXPENSIVE ?
(In other words, even if you can get it, do you really want it?)
If you are holding a property for short term gain, private equity financing usually is CHEAPER!
EXAMPLE: Amount of loan = $30,000
COMPARISON OF COSTS OVER A 4-8 MONTH HOLDING PERIOD
| Approximate Closing Costs |
Friendly Banker
|
EquityMax
|
| Closing costs (related to mortgage ONLY): |
|
|
| Application fee |
$350.00
|
-
|
| Points |
$900.00
|
$900.00
|
| Documentation Preparation |
$800.00
|
$400.00
|
| Credit report |
$50.00
|
$50.00
|
| Tax and Lien search |
$150.00
|
$150.00
|
| Title insurance + endorsements |
$500.00
|
$500.00
|
| Settlement Fees |
$350.00
|
$250.00
|
| Abstracting (Seller Should Pay) |
$250.00
|
-
|
| Documentary stamps, intangible tax, recording fees |
$225.00
|
$225.00
|
| Survey |
$350.00
|
-
|
| Appraisal |
$350.00
|
-
|
| Inspections |
$250.00
|
$100.00
|
| Misc. Expenses (wires, Fedex, LD Phone) |
$150.00
|
$50.00
|
| Funding or administrative fees |
$350.00
|
$200.00
|
| Totals |
$5,025.00
|
$2,825.00
|
| |
|
|
| Carrying costs: |
|
|
| Probable equity loan interest rate from bank = 8.5 % |
|
|
| Interest only for 12 mos.= 12 x 212.50 = |
$2,550.00
|
|
| Private equity rate 15% |
|
|
| Interest only for 12 months = 12 x 375.00 = |
|
$4,500.00
|
| Total costs in assuming a one-year hold. |
$7,575.00
|
$7,325.00
|
| Of course, the property could sell much quicker than in a year, and accordingly, your financing costs will be dramatically lower with a private lender. For example here are the comparisons of total financing costs if the property is held only: |
|
|
|
Four months:
|
$5,875.00
|
$4,325.00
|
|
Six months:
|
$6,300.00
|
$5,075.00
|
|
Eight months:
|
$6,725.00
|
$5,825.00
|
The quicker you sell the property, the more dramatic the difference!
Let's also not forget about the roughly $1500-2000 additional the bank will take out of your proceeds at funding to escrow for flood and windstorm insurance+ excess property taxes. EquityMax won´t!
WINNER AND STILL CHAMPION - THE HARD MONEY LOAN FROM EQUITYMAX !!!