Hard money mortgages are in huge demand today. With all of the foreclosures and loan woes today, in spite of Obama’s mortgage restructure plan, the demand still exists. Even though there is this big push on the mortgage companies to restructure loans and stop the foreclosures, this does not seem to be happening. The banks and lending institutions are following such strict guidelines that a very small percentage of those who are in mortgage default are actually getting any help. Enter the hard money lenders who are helping people to save their homes with hard money mortgages.
The basis of a hard money loan is not in the person’s current credit rating or even so much the borrower’s ability to pay back the mortgage. A hard money loan usually is funded by a private investor who has a large amount of money and is looking to get a better return than some stale CD plan at a bank. As a matter of fact, the hard money lender is putting his money in a safer place than the stock market in this day and age. Investing is real estate can, if done properly, be quite safe and profitable. Both the lender and the borrower can benefit from a hard money loan.
The investor will help a borrower get caught up on his house payments so the borrower will not lose his home and equity to the bank in a foreclosure or short sale. The lender will make a decent return on his investment. This can be a win-win situation. However, in some instances, the borrower is taking a larger risk than the lender.
The borrower is already in a financial crisis, if, after the loan is funded on the home, the borrower has another crisis, it can mean he will lose his home for sure. The reason for this is that the lender will guarantee his loan by lending only up to a maximum of 70% of the value of the home and ask for a first position lien on the property. This means one of two things, either the hard money lender pays off the bank and the entire loan on the property is hard money or the hard money lender will ask for another piece of property for collateral.
The important thing to remember is that the hard money lender will foreclose to get the investment back if the borrower defaults. The homeowner should be sure he can pay the loan back as agreed. As long as the loan can be paid back, the home owner can save his house by getting his money from hard money mortgages.