| What
is a Hard Money Mortgage?
First of all, lets define Hard Money. Hard money refers to borrowed money
that is hit with high interest rates usually because the borrower has
had credit problems or has a high amount of credit card debt.
What is a Hard Money Loan exactly?
A Hard Money Loan is one that simply loans out hard money. These loans
generally don’t need a lot of fancy paperwork and are easier to
obtain than conventional bank loans. Hard Money loans are procured through
private means in most cases. To obtain this type of loan you must have
plenty of equity in a parcel of real estate or you won’t receive
the loan. The lender is not going to want to lend you money if you have
tons of debt or past credit problems without collateral. Having equity
in real estate assures the lender that if you can’t pay back the
loan he/she will always get their money back. These loans are very helpful
to those in credit and debt trouble, however, they will end up having
to pay higher interest rates, but at least they can get the loan. It is
also helpful to those who just need a quick loan since hard money loans
don’t require much paperwork or time.
The usual LTV (Loan To Value) ratio on Hard Money Loans is 50-60% max.
This means if you own a piece of property with Fair-Market-Value of $100,000
you can borrow $50,000-60,000 against the real estate. The LTV on raw
land or non-income producing pieces of land are 33%. It can go up to 40-50%
for commercial properties, and for construction and land development.
Hard Money rates are generally between 14-24% and you will always have
to pay points. It is a good idea to avoid hard money loans unless you
absolutely need a loan, otherwise you will be paying an incredible amount
of extra money in interest and points.
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