Even though hard money lenders in NY are not in any way close to traditional lenders, they are far from being exempt from various fees in spite of their higher interest rates. It is important before you sign up with any hard money lender to be aware of the various fees that are likely to add to the overall cost of your loan.
Points are added as a percentage of the total loan amount. Sometimes a hard money lender in New York will charge points without identifying other fees separately such as underwriting or other fees. The amount you will pay for points depends on the individual transaction, agreement with the hard money lender, the loan to value of the property pledged, the overall risk and the complexity of the transaction.
Underwriting and Other Fees
The underwriting fee is a flat fee that ranges between $750-$2,500 based on the complexity of the transaction. Some lenders incorporate the underwriting fee into the points while others charge it separately.
Hard money lenders may also charge processing and document preparation fees. Both of these are flat fees they charge to process the loan and prepare the loan document. In some cases this fees will be a pass through because the hard money lender in New York is contracting with a private company to prepare the documents but in other cases it is just additional income for the private money lender.
If you were referred to a particular hard money lender by another one, that lender may charge a referral fee to the borrower that in reality covers the fee they negotiate to other lenders for referral business. While this might seem a little backwards, you have to remember hard money lenders cannot always handle every transaction, so this practice is very common within the hard money market.
Loan Servicing Fees
The investor pays a loan servicing fee to the private money lender if the PML personally services the loan. This means the PML collects your payments, maintains all records related to your loan and provides necessary reports. These fees vary and might be a flat fee monthly or a percentage of the loan balance.
You will have to pay a late fee if you make your payment after the date identified in the contract. The loan servicer actually splits this fee with the person or company that actually provided the funding, but the fee will be paid at the time the borrower pays the late fee.
The foreclosure fee could be paid to the private money lender or it may be paid to a third party. This depends whether the hard money lender in New York chooses to handle this process himself or outsource it to another company. If a hard money lender outsources this service, he or she does not normally share it with the outsourcing company.
If you find it necessary to renew your loan, the hard money lender in New York is likely to charge an additional fee for this service. This is not something that is guaranteed but is reserved for those borrowers who consistently pay on time.