馃攳
Origination Fee for Private Hard Money Loans Explained - YouTube
Channel: Private Lender Link
[0]
if you get financing for real estate
[1]
from a private or hard money lending
[3]
company
[3]
you are almost always going to pay an
[5]
origination fee in addition to your
[6]
interest payments
[8]
in this video i'm going to explain what
[9]
origination fees are and the typical
[11]
amount charged by most lenders and
[13]
mortgage brokers
[14]
i'm rocky battani ceo of
[16]
privatelenderlink.com
[17]
where investors and brokers can easily
[19]
find direct private and hard money
[21]
lending companies throughout the united
[22]
states
[23]
if you're in the investment real estate
[25]
business and want to gain insights into
[27]
private mortgage lending be sure to
[28]
subscribe to our channel
[30]
and click the bell icon to be notified
[31]
every time we release a new video
[33]
the origination fee and private or hard
[35]
money mortgage lending is a percentage
[37]
of the loan amount that the lender
[38]
charges just for
[39]
originating the loan if a mortgage
[41]
broker is involved in the deal they too
[43]
charge an origination fee
[45]
as their compensation the origination
[48]
fee
[48]
is a profit for the lender and the
[50]
broker and without it they wouldn't be
[52]
in business
[53]
obviously real estate investors would
[55]
like to not pay any of these fees
[57]
but don't look at it as some evil thing
[60]
you have to avoid at all cost
[61]
it's just part of doing business with
[63]
lenders origination fees are more
[65]
commonly known as
[66]
points this is the term that lenders and
[68]
brokers use in conversations and
[70]
advertising
[71]
the term origination fee is a bit more
[74]
formal you really only see it on the
[75]
term sheet
[76]
or the loan documents or the settlement
[78]
statement and you don't really hear a
[80]
lender saying
[80]
you know we charge an origination fee of
[83]
2.5 percent of the loan amount
[85]
instead lenders typically say we charge
[88]
two and a half points
[89]
and commercial real estate deals they
[91]
use the term basis points
[93]
so you may hear a lender say we charge
[95]
250 basis points or
[97]
250 bips for short it's the same thing
[101]
as two and a half points for the rest of
[103]
this video i'm going to say the word
[105]
origination fee and i'm also going to
[106]
say points just remember
[108]
it's the same thing so what are the
[111]
typical origination fees charged by most
[113]
private and hard money lending companies
[115]
in general it ranges from one to four
[117]
points
[118]
and this can vary based on a number of
[120]
factors including the loan amount
[122]
the loan type the bar's financial
[124]
situation
[125]
and which part of the country the
[126]
property is located in the majority of
[128]
lenders charge between
[129]
two and three points you could find a
[132]
lender that charges one or one and a
[134]
half points
[135]
but it's a bit rare to get anything
[137]
under two points from a private lending
[139]
company
[140]
it has to either be a really large deal
[142]
let's say over two million dollars
[144]
or it'd have to be a deal where a
[146]
mortgage broker is working with the
[148]
lender and the lender's willing to
[149]
reduce their points
[150]
or offer wholesale pricing on the high
[153]
end of the spectrum you may find some
[154]
lenders out there that charge four or
[156]
five points as a standard for almost all
[158]
the loans that they fund
[159]
this could be because all of their loans
[161]
carry a higher risk profile that most
[163]
other lenders are not willing to take on
[165]
and by that i mean loans like ground up
[167]
construction
[168]
land development agricultural properties
[171]
or second mortgages
[173]
if there's not a lot of competition out
[174]
there for the type of loan you're
[175]
seeking
[176]
you're likely to pay high origination
[178]
fees first of all because it's a riskier
[180]
loan
[181]
but also the lender is going to charge
[182]
more points because they can
[184]
i've heard of lenders charging 10 points
[187]
on a loan
[188]
but that's really only for small loan
[189]
amounts i'll give you an example
[191]
let's say a lender's average loan amount
[193]
is 200 000
[195]
and on most deals they charge two points
[197]
that amounts to
[198]
four thousand dollars which is really
[201]
their profit on that deal
[202]
then you come along and request a little
[204]
loan of thirty thousand dollars
[207]
and they don't typically do loans that
[208]
small but they'd consider it
[210]
but if they were only to charge two
[211]
points on that thirty thousand dollar
[213]
loan
[214]
that amounts to six hundred dollars in
[216]
profit for them for the same amount of
[218]
work
[218]
or maybe even more than for most of the
[220]
other loans that they fund
[222]
so in order for them to make it worth
[224]
their while
[225]
they have to charge more points so on
[227]
that thirty thousand dollar loan
[229]
ten points amounts to three thousand
[231]
dollars and in that case it may be worth
[233]
it for the lender and speaking of small
[235]
loan amounts there are not that many
[237]
private lending companies out there that
[238]
are willing to fund loans less than
[240]
fifty thousand dollars
[241]
we have a small handful of them on our
[243]
website that may go down to twenty to
[245]
twenty five thousand dollars
[247]
so it's very rare the majority of the
[249]
lenders in our network have a minimum
[251]
loan amount of one hundred thousand
[252]
dollars
[253]
and for commercial real estate it's
[255]
typically 250
[256]
000 there is so much detail i can go
[259]
into about
[260]
all the different fees that lenders
[261]
charge and the different ways that they
[263]
structure their fees
[264]
and i will make additional videos to
[265]
cover all that however for this video
[268]
i want to make one point about fee
[269]
structures the lender
[271]
that charges the lowest points is not
[274]
necessarily going to be the cheapest
[275]
lender
[276]
you really have to review all the fees
[277]
that lenders charge in addition to
[279]
origination fees
[280]
so it's not good enough to just get a
[282]
soft quote over the phone where the
[283]
lender says i'm gonna charge
[285]
you know 10 percent and two points
[288]
that's not good enough you need to get
[290]
a term sheet and writing or a soft code
[292]
in writing that lists all the different
[293]
fees you're going to pay
[294]
the in-house fees to the lender and also
[297]
the third-party fees such as appraisal
[299]
or other closing costs i'll give you an
[302]
example
[302]
let's say you want to get a loan of two
[304]
hundred thousand dollars and you get
[306]
quotes from two lenders
[308]
lender a is quoting two points but they
[310]
also charge a one thousand dollar
[312]
processing fee a five hundred dollar
[314]
underwriting fee
[316]
and a five hundred dollar loan docs fee
[318]
that amounts to six thousand dollars in
[320]
fees to the lender
[322]
then you get a quote from lender b and
[324]
they're quoting three points
[326]
but no other additional fees they don't
[328]
charge for processing underwriting or
[330]
docs
[330]
it's just three points that also amounts
[333]
to six thousand dollars
[334]
so it's the same thing so the point i'm
[337]
trying to make is
[338]
don't just write off a lender that
[339]
charges more points than other lenders
[341]
you really have to dig deeper and learn
[343]
about all the different fees that the
[344]
lender charges
[346]
what about mortgage brokers if a
[348]
mortgage broker is involved in the deal
[350]
representing the borrower
[352]
they too charge an origination fee and
[354]
just with the lenders
[355]
their fee will vary based on the loan
[357]
amount as well but
[358]
in general for most of the private and
[360]
hard money loans i've seen brokers
[362]
charging one or two points the mortgage
[364]
broker's origination fee may also depend
[366]
on what the lender is charging
[368]
if the lender is charging two points
[370]
then the mortgage broker is likely not
[371]
going to be able to charge more than two
[373]
points for themselves
[374]
most lenders won't allow mortgage broker
[377]
to charge more than what they charge
[379]
it has to be the same or less i've even
[382]
seen some lenders put a cap on the total
[384]
number of points that
[385]
they'll allow any borrower to pay on any
[387]
of their loans and in that case
[389]
the lender may have to be flexible with
[391]
their points to accommodate the mortgage
[392]
broker
[393]
and make sure they're fairly compensated
[395]
there are some cases where a mortgage
[396]
broker will charge one
[398]
two or three points and the lender
[400]
doesn't charge any points at all
[402]
this is most likely going to be a
[403]
situation where the lender
[405]
is a wealthy individual investor or a
[408]
family office investment firm
[410]
that doesn't participate in the
[411]
origination of the loan maybe they're
[413]
not qualified to
[415]
or they're not permitted by state law to
[417]
receive an origination fee
[419]
they're just the investor they're just
[421]
putting the money into escrow or into
[423]
closing
[424]
to fund the loan they get the interest
[427]
payments
[427]
the broker or loan originator gets the
[430]
origination fee
[431]
if you're looking for a private or hard
[432]
money lender use our website
[434]
privatelenderlink.com as a resource
[436]
there's no fee to search and no
[438]
registration required you'll find that
[440]
all the lenders profiles have a lot of
[441]
details including the fees they charge
[444]
all the lenders that show up in the
[445]
first page of the search results
[447]
we require all of them to state their
[449]
minimum and maximum origination fee
[452]
and you'll find that in their lender
[453]
card and search results
[455]
you'll also find it at the top of their
[457]
lending guidelines page
[458]
if you go down to the bottom of the
[460]
lending guidelines page you'll see a
[461]
section
[462]
where you'll find all their other feeds
[463]
they charge now they're not required to
[466]
state the amount of all those fees
[467]
because it could vary
[468]
but they should at least put in the type
[471]
of fee that they would charge in
[472]
addition to origination
[474]
if you found this video to be helpful
[475]
please click the like button below and
[477]
be sure to check out our other videos
[478]
about private and hard money lending
[480]
thanks for watching and see you in the
[482]
next video
Most Recent Videos:
You can go back to the homepage right here: Homepage