Important Facts That You Must Be Aware Of Regarding Hard Money Loan
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. Moreover, it has been said as well that hard money loans consist of a first mortgage on a residence and this process lead to the creation of hard money residential loans. Always bear in mind that there are several important identifying factors that are involved in hard money loan.
For an instance, it is usually the first mortgage which we have stated above. And because the credit score of the borrower will not matter the same way the equity of their property does, when a first mortgage takes effect, it will prevent any possible loss of the entire property, especially if there is another loan ahead of 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.
The next thing that you have to be aware of regarding this matter at hand is the fact that another facet of a hard money loan has something to do with them usually charging very high interest rates and high points as well. You should know by now that if the property you have is secured enough, the high points will become a part of the actual loan you are getting from them. 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. If you are thinking about the possible reason why they are doing so, well, it is actually because of their desire to protect themselves from the possibility of borrowers not paying their dues back or being deceived by them. This is their way as well to ensuring that their interests are protected.