Before submitting your hard money loan request, there are five important questions you should ask your hard money lender:

1. Are you a direct lender who controls your own funds? There are some brokers who masquerade as lenders, but who aren’t actually lending their own funds. Instead, they act as a middleman between the actual lender and the borrower, often without the borrower’s knowledge. By not working directly with the funding source and final decision-maker, the borrower can often encounter problems such as changing terms and timelines. Montegra is a direct lender, so when you work with us, you’re dealing with the ultimate decision-maker.
2. What upfront fees do you charge? Borrowers should be wary of lenders who request substantial upfront fees before they will decide whether or not to fund your loan. Often such lenders function more as fee collectors than as loan makers. This is often commonplace in private lenders that lend nationwide. Montegra’s loan fees for closing the loan range between 2% and 3% of which only a small portion is taken upfront as a commitment fee and the rest comes out of loan closing.
3. How large is your loan portfolio? In the lending market, size does matter. If a lender has very limited funds to lend, then they are likely to be very selective about what they lend on and more aggressive in collecting any late or missed payments. On the other end of the spectrum, a very large lender may treat you as simply a number. The key is to find a lender who is small enough to maintain personal transactions while large enough to have the ability to lend funds more freely and handle all of your loan needs with flexible service. Montegra is a small lender that manages a capital income fund enabling us to make loans ranging from $250,000 to $5 million.
4. What loan terms do you offer? The majority of hard money lenders specialize in loan terms that are a year or less (usually six months) and typically charge anywhere from 10% to 15% in interest rates. If you do go with a very short loan term, it’s a good idea to go with a lender who will allow you to extend the loan for a longer term (another six months to a year) in the event of unexpected circumstances that delay your exit strategy. Currently, Montegra offers loans lasting six months to three years that are payable interest-only with interest rates between 10% and 10.5%. Additionally, Montegra provides all borrowers with a written term commitment letter prior to closing.
5. Do you charge a penalty for prepayment? Some hard money lenders charge prepayment penalties or exit fees on their loans. This is something that borrowers need to be aware of and consider when they’re comparing lenders and/or loans as it will cut into the expected return or profit of the deal.

The answers to these five questions should help you to quickly compare and evaluate hard money lenders to find the one that is a perfect fit for you and your deal.