What is the Interest Rate for a Hard Money Loan in 2024?

What is the interest rate for a hard money loan? We’ll explore the answer to that in this article, as well as tips on getting (and tax-deductible!) interest rates. Read below to learn more.

Main Takeaways

• The interest rate for a hard money loan can be up to 15%. However, some lenders may offer lower rates (like 12%).
• You can negotiate better hard money loan rates by having a good credit score, collateral property, debt-to-income ratio, loan-to-value ratio, and exit strategy. To really top it off, you can have proven real estate experience.
• Also, you could pay a bigger down payment upfront to avoid bigger interest rates in your loan term.

Table of Contents

• What is the Interest Rate for a Hard Money Loan?
• How to Get a Better Loan Interest Rate 
• Can You Write Your Loan’s Interest Off Your Taxes?

What is the Interest Rate for a Hard Money Loan?

As of 2024, hard money loan rates can reach 15%. However, some lenders, like Baltimore hard money loan providers, may offer lower rates, like 12%.

How to Get a Better Loan Interest Rate 

To get better hard money loan rates, there are some tried-and-true criteria you should try to meet:

A High Credit Score

Having a high credit score is easily one of the biggest things you can do to get a better interest rate for a hard money loan. It shows that you have a solid history of meeting your financial responsibilities. This reassures your lender that you will be able to repay your loan.

Pay A Bigger Down Payment Now

Usually, hard money lenders ask for around 10% to 30% of your overall loan amount as a down payment. The more of a down payment you pay now, the lower your interest rates will be later. That’s why it might be a good idea to shell out more down payment funds from the start so there’s less to worry about down the road.

Have a Solid Exit Strategy

You should show that you have an actionable, step-by-step, data-backed plan for putting your project in motion. After all, it’s easy enough to shape a vague idea of what you want to do. However, delving into the specifics of how exactly you will execute every detail of the project is a whole other matter.

So, break down the logistics of the project for your lender to understand. Show how you will coordinate each aspect of the project and handle potential obstacles. This way, they know the project they’re funding will likely have a good ROI. By doing this, you can help secure a better interest rate for a hard money loan.

Have a Great Collateral Property

Collateral properties are the cornerstone of a hard money loan. Your lender uses them to secure your loan.

As such, the quality of your property plays a key role in your overall loan deal. If you have a high-quality property, that’s a big selling point. It entices lenders to do what they can to keep you as a borrower. Because of that, they may give you more leeway with your hard money loan rates.

Have a Good Debt-to-Income Ratio

Debt-to-income ratios compare how big your income is compared to your requested loan amount. Essentially, they show whether you have enough money to cover your monthly loan payments.

As a rule of thumb, your debt-to-income ratio should ideally be under 35%. A low ratio demonstrates that you’re a safe choice for lenders. In turn, you posit yourself as an ideal borrower who deserves a better interest rate for a hard money loan.

Possess a Good Loan-to-Value Ratio

A loan-to-value ratio compares your property value to your requested loan amount.

Your property value signifies your stake in your project, while the loan represents what your lender is pitching in. The smaller the loan amount compares to your property value, the smaller the lender’s share in your project. As a result, their risk is also reduced. This makes you a better borrower for lenders.

Your Real Estate Experience

By pointing to your background in real estate, you gain credibility. Indisputably, you show you don’t just talk the talk; you walk the walk.

This gives you a one-up over newcomers in the industry. After all, they would rather deal with someone who knows what they’re doing than one in the trial-and-error stage. They want someone with the skills to see a project to fruition. All in all, it makes you stand out as a borrower, increasing your chances of negotiating better hard money loan rates.

Can You Write Your Loan’s Interest Off of Your Taxes?

If you meet certain criteria, you may be eligible to write off your interest rate for a hard money loan:

• The loan is in your name
• You plan on writing off your loan within a concrete timeline
• You plan on spending your loan funds, not saving them
• You must work with a registered lender

Get Better Hard Money Loan Rates with MHML Baltimore

In summary, the interest rate for a hard money loan can rack up to 15%. You can potentially reduce your rates by boosting your specs as a borrower. To do this, you should have a low DTI and LTV ratio, a good credit score, a good exit strategy, and other indicators that you’re an experienced, reliable real estate investor. In addition, you can look for a lender who offers lower rates.

At Maryland Hard Money Lenders in Baltimore, we offer rates starting at just 12%. Also, we emphasize fast service, so we can give you expedited loan delivery within 48 hours. Even better, if you’re an experienced investor with good credit and collateral, we may offer you up to 100% financing upfront. So, call us today to see if you’re eligible for our premium loan terms.