Agreements with non-traditional funding sources often include stipulations regarding interest rates, loan duration, points or origination fees, prepayment penalties, and loan-to-value ratios. For example, a borrower might agree to pay 12% interest with 3 points on a loan that covers 70% of a property’s after-repair value, with a six-month term and a penalty for early payoff.
These conditions can offer borrowers access to capital more quickly and with less stringent requirements than conventional financing, enabling them to pursue time-sensitive opportunities such as property flips or bridge loans. Historically, these arrangements have been utilized by investors who require immediate funding or who cannot qualify for traditional mortgages due to credit history or the nature of the investment property.
