Hard Money Loan - Types

If you are looking for a hard money loan, there are many types to consider depending on what's best for your situation.  It is worth knowing all the different types being offered so you'll know which one fits your needs based on type of property, costs, fees, terms, and interest rates.  

Before moving forward, I recommend learning the following regarding hard money:

Hard Money Loan - Residential

Hard Money First (1st) Mortgage Loan: 

First mortgage position is perceived to be the least risky for a hard money lender (as with any lender).  This is the reason why it typically comes with a lower interest rate and less points.  We're talking hard money here so "lower interest rate" is relative.  Please don't expect bank rates.  
    • First Mortgage Hard Money Rates - The lowest hard money rates I've seen for a first mortgage were in the 8-9% range.  Of course, the lower the LTV (loan-to-value) ratio, the less risky the hard money loan seems, so a lender is more comfortable offering a lower rate.
    • First Mortgage Hard Money Points - As for points, hard money lenders usually charge anywhere from 3-6 points (basically 3-6% or your loan amount) depending if a broker is involved, and where your loan request sits on their risk meter.  Obviously, the lower the LTV, the better, and ability to pay counts for a lot these days.

Hard Money Second (2nd) Mortgage Loan or Hard Money HELOC:

Hard money second mortgage positions can be a Home Equity Line of Credit (HELOC) or a "straight" second mortgage (regular second mortgage).  It is a junior lien behind the first mortgage which is the senior lien.  Junior lien positions are deemed riskier because if the first mortgage lender files foreclosure first, the junior liens can be wiped out unless the junior lien reinstates the senior lien, taking it out of foreclosure, then files foreclosure themselves.  The junior lien will then have to take over the payments to the senior lien to keep it current.  They will add whatever funds they've had to use to make payments as well as other costs to their payoff demand when the property is either sold at auction or refinanced and brought current with a new lender.
    • Second Mortgage Hard Money Rates - The rates for hard money seconds usually range between 10% at the lowest, to as high as 20% (for Hard Money Helocs).  The lower the LTV, and the better the overall risk assessment is, the lower the rate.
    • Second Mortgage Hard Money Points - Just like the rates, points are also much higher for hard money seconds, ranging from 5 points (for "straight" seconds) to 15 points (for HELOC's) or 5-15% of your loan amount.
Important to note:  The above rates and points for hard money seconds may be shockingly high, but if you put it into perspective, the loan amounts are most often much lower than the first mortgage, so it may actually be less costly to get a hard money second than a hard money first since the rate and points are a percentage of the loan amount itself.  

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