Hard Money Loans - FAQ
Terms, definitions and common practices
Why use a private-money loan?
Generally people will turn to a private-money loan when they need to close quickly, have property which will not finance conventionally, or if for some reason they might not qualify for a bank loan. Many of AIC’s clients are bankable but choose to use AIC as their premier lender because we are effective, quick and reliable. AIC generally funds loans within days of receiving the requested documentation from the Borrower. AIC does not typically require an appraisal, which allows for much quicker closings.
Where do you do business?
How does AIC determine the rate and fees I will pay?
The interest rate is set at 12%. AIC never charges any up-front or junk fees. Our loan-origination fee will be based on several factors, including the volume of our business with the Borrower and the specifics of the transaction. AIC’s loan originators will let you know right away if we are able to help and what the terms of the loan will be. AIC promises to never waste your time.
What does “interest-only payment” mean? What does my monthly interest-only payment include?
An interest-only payment means that each month the Borrower is only paying one month’s worth of interest on the gross amount of the loan. The first interest-only payment is due 30 days after the anticipated closing and funding date. There is a balloon payment due at the end of the term or upon sale of the property.
What is a balloon payment?
A balloon payment is the repayment of the outstanding principal sum (the gross loan amount) and any unpaid interest or other charges on the account. This balloon payment is made at the end of the loan period, which is generally a 23 months from the date of closing, or earlier if the property is sold. Interest-only payments are due monthly until the loan is paid in full.
What is a construction reserve?
Most AIC loans involve a construction component. In these cases, AIC will hold back the funds necessary to complete the new construction or remodeling project. The Borrower will provide a line-item budget AIC will use as a guide to disburse the construction funds held in reserve. Click here to see how to utilize the construction reserve.
As a Borrower can I set up automatic payments to be pulled from my account every month?
Will I be charged interest on the reserve funds?
Yes. AIC’s investor delivers the entire gross-loan amount at closing. The Borrower can draw from the reserve at any time as the work is completed, inspected and AIC’s draw-request form is provided. Your interest-only payments are based on the entire gross-loan amount, which includes any payment or construction reserves.
How much cash will I need to put down?
The amount of cash you will need to contribute always depends on the details of your particular project. Each loan scenario is different and will be analyzed by Austin and Mike to determine the best loan structure. AIC does not have any set percentage or amount necessary for you to contribute. The down-payment amount will be based on the merits and challenges of your project. AIC will never charge any up-front fees and is always available to discuss your specific loan request.
Do I need insurance on the property? What kind of insurance do I need?
Fire insurance is required on all properties with insurable improvements. AIC requires our Borrowers to find and manage their own insurance. At closing the Borrower must provide a valid binder showing the funding Investor listed as mortgagee. For all new-construction loans, course-of-construction insurance is required prior to framing.
How do I make payments?
You will mail checks directly to AIC. We process all payments at our Springfield office. Checks must be made payable to the AIC Client Trust Account. In the memo line we ask that you include the loan number and last name on the account. Please also include the associated payment coupon that will be sent to you via email and mail when your loan closes.
Please mail checks to: Advanced Investment Corp. at 380 Q Street, Suite 240, Springfield, OR 97477
How do I pay off my loan?
If you are selling your property, AIC works with escrow companies from start to finish. If you are closing through an escrow company, your escrow agent will contact AIC to request a payoff letter. If you are paying off a loan outside of an escrow company, you can call or email the AIC team and we will get the information required for your loan’s payoff.