A few times a month, we at First Capital Trust Deeds are asked by prospective borrowers, Realtors, and mortgage brokers what are the lowest interest rates for hard money bridge loans we can secure for financing for a customer.
Over the years, our lowest bridge loan interest rates have been as low as 5.99% in the first year, “stair stepping” up to 6.99% in the second year. The 5.99% / 6.99% stair step was back when interest rates were near zero during the period of 2009-2013. In the past year, however, hard money bridge loan rates have been as low as 7.25% for 12-month terms.
These very low private money and hard money interest rates were reserved for very strong borrowers with ultra-low leverage on their properties, meaning a very low Loan-To-Value (LTV) in the 25-40% range.
Some previously funded examples include:
- 5.99% for months 1-12, 6.99% for months 13-36: 36-Month Loan for self-employed borrower who acquired a new business within the last 12 months, reflecting a paper loss on their income taxes which made it impossible to qualify for a jumbo bank loan. This was in 2013, back when the Federal Reserve held rates near zero and before the advent of the non-QM loan market.
- 7.25% for 12 months: recently completed luxury spec home listed for sale in Orange County. The BWR had an excellent track record, was financially strong, and had a low LTV of 40%.
- 7.49% for months 1-6, 7.99% for months 7-12, & 8.99% for months 13-24: Foreign National buyer acquiring a $7,500,000 home in Silicon Valley. FCTD structured the loan with the borrower and lender to accommodate the lowest interest rate and payments during the first year. The borrower’s goal was to refinance into long-term bank financing within six months, thus capitalizing on the low introductory rate at 7.49%.
- 7.99% for 12 months: another recently completed luxury spec home in Portland listed for sale. The borrower was strong, had a successful track record, the home was phenomenal, and the loan carried a relatively low-LTV at 65%. To strengthen the loan package, the borrower set up a 6-month interest reserve (setting aside 6 payments into an escrow account).
The majority of the hard money bridge loans originated by First Capital, whether it’s a 12-month bridge loan to quickly acquire a property within a week, or a fix and flip loan for acquisition and renovation, have interest rates starting out at 9.00% and going up to 12.00%. The majority of FCTD’s bridge loans tend to have higher leverage, in the 70-80% of purchase price, which leads to pricing at the regular market rate around 9.00%.
In order for a real estate investor to qualify for the lowest interest rates for hard money bridge loans, it’s best to have excellent liquidity, great credit, a great track record, and a trophy property with very low leverage. These five features make it much more likely that an investor will obtain lowest interest rates for a hard money bridge loan on their next project.