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