Learning The Secrets About Lenders

Important Facts That You Must Be Aware Of Regarding Hard Money Loan

One thing about hard money loan, or better known as private loan money, is the fact that this is a type of loan that can only be attained from sources that are specializing in the construction of the said 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. 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. 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. If you are wondering why the credit history of the borrower will not matter for hard money loan, well, that is due to the fact that the lender looks to the property for its security, not to mention that the lender is being paid dearly for the chance that they take by basing all the money 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. In some cases, if the property of the person applying for a hard money loan is secured enough, the high points will be rolled into the actual loan. More often than not, the loan is not paid in the usual principle plus interest but more likely, they are being paid in interest only with a balloon at the end of the stated 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.

Basically speaking, most of the hard money lenders out there are being keen and cautious with their decision and they want a careful appraisal of the 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. As private lenders, they have to make sure that their interests are protected as well.

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Learning The Secrets About Lenders