Everything About Hard Money Loan – Things You Need To Know When It Comes To It
If there is one thing about hard money loan that we want you to be aware of, that would be the fact that they are only attainable from sources that are specializing in the structuring of this kind of loan. Furthermore, we want you to know as well that this is a kind of loan that comprises of a first mortgage on a residence that leads to the creation of hard money residential loans. Take note that there are quite a number of important factors that must be taken into account when determining a hard money loan.
One example of which is the first mortgage, which we have already stated earlier on in this article. Since the borrower’s credit will not matter as much as the equity in the property does, a first mortgage that is in effect will stop any potential loss of the property, most especially if the borrower has another loan before the hard money loan. For those of you out there who may be wondering about the possible reason as to why lenders do not mind the credit history of the borrower, well, that is because they look to the property for security, plus they are being paid dearly as well for the chance they take by basing the payment on the value of the property alone.
Another thing that you should know regarding hard money loan is the fact that they are typically charging very high interest rates and high points as well. There are instances wherein if the property is secure enough, the high points will be rolled into the actual loan. The truth of the matter is that the loan is actually not paid in the normal principle plus interest, instead, they are more likely to be paid with interests only, with a balloon at the end of the specified loan period. With regards to this matter at hand, the borrower will be paying interest on interest and due to the fact that points are interest and mortgages are calculated with the inclusion of points, each payment that the borrowers make is paying interest only, therefore the interest on interest.
It is safe to say that all hard money lenders out there are looking for a legit and credible borrower thus, they see to it that a careful appraisal is done to their property. They are doing this because they want to protect themselves from the possibility of getting deceived by the borrower or from having to suffer from significant loss if they cannot pay them back. They have to protect their interest as well.