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Posted On June 27, 2020
Things Worth Noting About Hard Money Loans
Private loan money is also known as hard money. When it comes to structuring these loans, hard money lenders come in. If you get a hard money loan, you will also get a first mortgage on your residence, resulting in the so-called hard money residential loans. There are certain features that only hard money loans offer. If you are planning to get this kind of loan, make sure to learn as much as you can about it first.
One of the features of a hard money loan is that it is going to be your first mortgage. For this type of loan, what matters most is the amount of property equity. Hard money lenders will not be putting a lot of their attention on the borrower’s credit. With the first will in effect, you can prevent the potential loss of the whole property. Take, for instance, if another loan comes ahead of the hard money loan. Hard money lenders don’t focus as much on the credit standing of the borrower because they only have their eyes on the property for its security. With the lender basing how much money they lend to the borrower on the value of the property, they are paid significantly for taking the chance.
In terms of interest rates and points, you will be getting them very high when you borrow from hard money lenders. For properties that are deemed secure enough, the high points will added into the actual loan. You don’t get to pay this type of loan with the usual principle plus interest equation. With this kind of loan, you will be paying the interest only, which might include additional charges once the declared loan period is done. Simply, the borrower will only be paying their interest on interest because the points are considered as interest. Your mortgage is often calculated to include the points. Thus, each payment that you make as a borrower implies paying for your interest only.
When it comes to most hard money lenders, they make sure to do a careful appraisal of your property. They do this to ensure that they can protect their private money. These lenders will see to it that they take a close look at the loan to value ratio of your property. This ratio is the percentage amount that the loan will be in comparison to the present value of your property. Take, for instance, a property at a value of $100,00 with an LTV of 70/30. Looking that these numbers, you can expect the lender to only let you borrow $70,000 from the value of your property.
In this modern age, you have plenty of hard money lenders to choose from. Ensure to go with reliable lenders only that you know you can rely on with the knowledge and experience that they have too in hard money loans.
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