Fairfield Financial Services, Inc. - Private Money Loans, Lending & Borrowing

The cost of hard money

Clay Sparkman

After 50 years in the hard money business (as a family operation)  and 20+ years personally, you’d think we’d know what to expect. But let’s face it, no one really knows what to expect in the complex globally based financial world.

For my first 15 or so years working in the hard money industry, I was always amazed that no matter what conventional rates seemed to do, hard money rates seemed to remain amazingly constant. Rates pretty much always fell into the 10-15% range, with 13% being, more or less, our mean and our median rates. Fees pretty much remained constant.

Over this past year we had to acknowledge the fact that we were having a tough time competing with others private money sources. We decided that we would have to face up to the fact that–with bank rates low and with many more banks lending–the cost of hard money had simply fallen. We lowered our rate range to 10-13%, with most of our loans being placed at 11%, and in certain cases, we lowered our front end fees.

Sure enough: We began securing more high quality loans, our lenders were happy to invest at 11% (still a darned good rate for a solid loan secured by real property), and we were willing to take a hit in our fees from time to time in order to increase our overall loan flow.

Now, we must remain vigilant. Real estate starts and prices seem to be leveling off a bit, and this would tend to lead to higher bank rates and thus higher hard money rates–but for now this is where we stand.

I would be interested to hear the prognostications of any of my readers, so please feel free to comment.

- Clay (clay@privatemoneysource.com, 503-476-2909 or 800-971-1858)

Clay is Vice President of Fairfield Financial, a primary source for private money loans since 1964.  Fairfield works with a broad range of private money investors, in a broker capacity, finding, underwriting, presenting, closing, servicing, and when necessary, assisting in the workout of difficult loans.

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