The #1 question every lender receives is “what are your interest rates?”
There’s a long and short answer to that question. The short answer is that our rates range from 8.99% to 11.99% depending on the loan, the experience of the borrower, and the nature of the project.
The more in depth answer is two-fold. You will want to consider the following:
- When and how interest is being charged.
- Your leverage point.
You may have heard of the phrase “dutch interest” or “interest as deployed.” These terms refer to the idea that interest is only charged on the capital as it is being used.
The day you close on a hard money loan with Alpha Funding, you will be funded the agreed upon amount for the acquisition. The construction funds, which we fund 100% of, go into a reserve account where they stay until they’re needed.
You, as the borrower, are responsible for working with your contractors to complete the first phase of construction. Upon completion of the first phase, you will then submit for a draw request. (See Draws blog). The work is then inspected by an inspection company and the report is sent to Alpha Funding for review. Our team will then review the completed work and match it up to the original scope of work. Once approved, Alpha will wire the approved portion of construction funds.
This is important to note: Interest is ONLY charged on the funds that have been drawn out. Anything that stays in the reserve account during the length of the loan does NOT collect interest.
We do not require borrowers to draw down on the funds at a certain time, nor do we have any minimum draw requirements. The construction piece of the loan can be used however each borrower chooses.
The second factor to consider is your leverage point. Most people want to get into a loan with as little money down as possible, aka the highest amount of leverage. However, some investors would rather bring more to the table at closing and get a lower interest rate on their loan. Depending on your unique situation, Alpha works to find the best combination of rates and leverage for each individual borrower.
We can offer higher leverage at 90% of the purchase price and we will cover 100% of the rehab costs. So you, as the borrower, are only bringing 10% of the purchase price to the table. Rates would fall around 10-11% for a loan like this and allows you to keep more money in your pocket for other projects. We also have options for lower leverage loans where a borrower can bring 20% or more to the table and get a lower interest rate on the loan.
Our goal at Alpha is to inform, educate, and serve as a partner to our borrowers. Offering options allows us to work with you as an individual to find the proper balance that fits your needs.
This is what we mean when we say that Alpha Funding offers the best combination of rates AND leverage in the industry. The leverage point, the low rates, and the interest being charged on money that is used combined is what makes Alpha a preferred lender for hundreds of borrowers.
So while the short answer of 10% interest is easy to offer as a response, we want you to understand the big picture. If you are being guaranteed a low interest rate by another lender, make sure you find out whether you’re paying interest as deployed or what is known as “full boat interest”, where you would pay the entire percentage on the entire loan amount for the full term. Also be sure to ask what your down payment requirement would be. Take all these factors into consideration when looking for your capital partner.
We look forward to giving you the best Alpha experience and helping you achieve your goals.
Get started today! Submit your quick pre approval HERE or call 732-657-2014. We can’t wait to work with you!