Private loan money is also known as hard money. When it comes to structuring these loans, hard money lenders come in. You get the term hard money residential loans since hard money loans often begin with a first mortgage on a residence. Many aspects come into play when you talk about hard money loans. What follows are a few facts worth noting about this type of loan for you to understand it better before applying for one.
When it comes to hard money loans, you have to understand that they are generally first mortgages. The amount of equity that you get from the property is what counts for this kind of loan. Hard money lenders will not be putting a lot of their attention on the borrower’s credit. The borrower will not be losing all of his or her property because of the first will in effect. Take, for example, another loan comes first in comparison to 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. On the part of the lender, allowing the borrower to get money from them based on the value of their property is taking a chance so that they get paid dearly in return.
If you are going to take a hard money loan, the lender will be charging very high points and interest rates. You can expect the high points to go into your actual loan if your property is considered secure. For this kind of loan, you will not be paying back with the principle and interest rates added. What you will be paying for this loan will be the interest only along with some charges at the end of the payment period of the loan. In short, with points being interest in themselves, you are paying interest on your interest. Points are often calculated along with your mortgage. 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. The loan to value ratio of your property is something that these lenders make sure to consider. This ratio will be the loan percentage amount that you will be getting against the present value of your property. Take, for instance, a property at a value of $100,00 with an LTV of 70/30. What this means is that the hard money lender will be lending you $70,000 against the value of your property.
In this modern age, you have plenty of hard money lenders to choose from. Only choose reliable lenders whom you can trust and have the necessary experience in the field.
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