What Affects Hard Money Loan Rates?

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Many people wonder what factors impact hard money lending in Houston. Traditional banks often alter their rates based on federal interest rates, so it’s natural to wonder whether federal rates also affect hard money lending in Houston. Luckily, changes to federal interest rates rarely affect hard money loans. Your private money lender in Houston bases your hard money loan on the strength of the deal more than anything else, which is why those with lower credit scores can often still get a hard money loan in Houston. Instead, hard money lenders consider other factors when determining your loan rates.

What does the Typical Hard Money Loan in Houston Look Like?

hard money lending Houston - Texas Funding
Many things may affect hard money lending in Houston.

Hard money lending in Houston typically includes more risk for your lender than a traditional mortgage. Therefore, rates are often higher than other property loans. However, there are many benefits to using hard money for real estate investments. Closing times are generally quite short, hard money loans come in cash, and private money lenders in Houston are more willing to lend to borrowers with poor credit or multiple other loans. Though each loan will be different, here are some average ranges for a hard money loan in Houston:

  • Rates are typically from 7.5% to 15%
  • Terms are usually from 3 months to 3 years
  • Points can range from 2% to 10%
  • Closing times are quick, often 10-15 days
  • Down payments are typically a minimum of 10% of the loan to value ratio, or 25% of the after-renovation value

However, depending on the deal, these elements can all change. Because hard money lending in Houston is based more on the property you intend to buy, many of these factors can fluctuate. There are a few things that lenders consider when determining the particulars of your hard money loan.

What Affects a Hard Money Lending in Houston?

Though hard money lending in Houston isn’t typically affected by federal interest rates, there are factors that determine your hard money loan rates. Your lender looks at several things to find a deal that works best for everyone. 

Exit Strategy

Your exit strategy can have a large impact on your hard money rates. The reason this can affect your rates is because tells your lender how long their money will be at risk and how high the risk is. Therefore, your private money lender in Houston will likely ask you about your exit strategy and how you plan to pay back your loan. This can affect many elements of your hard money deal.

Loan to Value Ratio

Another influencing component of your hard money loan is the loan to value, or LTV, ratio. The lower your LTV, the less risk for a lender. Therefore, LTV ratio significantly influences your loan approval and rates.


Hard money lending in Houston can also take location into account. For example, many national lenders consider whether a property is in a mortgage state or a deed of trust state. Hard money rates in Texas may be lower compared to elsewhere because lenders can foreclose on properties if you don’t pay back your loan. Other geographical factors also play a role in your hard money loan rates, like how many lenders are in your area. Rates tend to be lower in areas where there is a lot of competition for hard money lenders.

Therefore, hard money lending in Houston mainly depends on the strength of your potential property and how much risk is associated with the real estate. This can be comforting for many, as it means that personal history doesn’t factor into their loan rates as much as traditional financing. Working with a reputable and experienced hard money lender can help you invest in the real estate you want, even if you have poor credit or multiple loans. Fast closing and easy approval make hard money loans great for your asset acquisition. 

If you are considering a hard money loan in Houston, the team at Texas Funding can help. We specialize in hard money lending for all types of real estate investment. We are a proudly local lending firm with solutions that can help you invest in real estate. Call us today at 1-800-833-0138 to learn more or for a fast response on your loan application. We are happy to work with you to find the best loan arrangements for your needs.