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. Not only that, there goes the fact as well that a hard money loan is a kind loan that consist of a first mortgage on a residence, leading to the creation of a hard money residential loans. You should know by now that when it comes to the identification of hard money loans, there are several important factors to be considered.
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.
There are other things that you must know when it comes to hard money loan such as the fact that they are normally charging really high interest and also, high points too. 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.
You can actually say that it is common for hard money lenders out there to be careful and cautious when lending hard money thus, they resort to ensuring a careful appraisal is done on the property. The main reason why hard money lenders are doing such a thing is because it serve as protection for them from bogus borrowers and from the horrors of not being paid by them. As private lenders, they have to make sure that their interests are protected as well.