What loan at What cost?

Loans and lending are continuing to be a topic of interest. As the economy slow down providing the best financing possible to borrower is crucial. Until recently numerous borrower thought that they had an understanding of lending. As it appears, numerous mistakes were made. Today as real estate professionals we have the obligation to provide more valuable financial information and advice to our clients. Telling clients that they are getting the best rate does not really address anything and provide very little information.

As your can imagine, as a Hard Money Lender I get he usual your rates are too high from a number of people. This type of comments reflects a foundamental miss understanding of what an interest rate is. A rate represent a risk the higher the potential risk, the higher the rate. It is clear that subprime lenders provided financing solutions at rates that were clearly to low. If they had provided loans at rate that reflected the risks, most likely we would not be in the mess we are in today.

Understanding the intentions of your clients will allow you to help them understand what option they have. Once you are able to establish what your clients need, then your can help them understand the different options and costs associated with each options. I am a firm believer that discussing costs and options is the right approach. Our clients should understand that every loan has a cost, that different types of lenders will offer different products.