In the past, there has not been quite the demand for hard money mortgage loans there are today. The hard money lenders have always been, by tradition, private individuals that look to invest their money in real estate at a healthy interest rate. These loans are made by individuals because the traditional banks and financial institutions do not make loans to someone who is going into or is in foreclosure. You will be able to find someone who is wiling to make hard money mortgage loans on the internet with a few key strokes and a click or two of your mouse.
The hard money loan terms are usually quite aggressive in nature. The points or fees that you will pay to get the loan will be about double what the other types of mortgage loans would be for the same amount of loan. This is because if you are looking into hard money mortgage loans, you have probably exhausted all your other options and this is a last resort. The reason for this is that you are definitely a credit risk to say the least and the investor will want to be compensated for that risk. So the only way that this lender is going to make this loan to you is if it is very profitable for him.
The lender will also want to hedge his risk by lending on only a percentage of your home’s value. The highest amount usually lent to a borrower in this type of financial situation is 70% of the value of the home. This will insure that the lender can recoup his money if you do not perform on the loan. Sometimes this can be very tricky because some hard money lenders will want to have a first lien position on the property. If they take a second position the total loans against the house will usually never be more than 60 or 65% of the value. Again, this is to insure that the lender will get his money one way or the other if you default.
You should also be prepared to pay a higher interest rate than you are accustomed to on a mortgage. These rates are typically from 11% to 19%, all depending on the risk in this particular situation. It is worth looking into a hard money mortgage loans if you face losing your home to a short sale or foreclosure. No matter what the interest rate, if you can get a payment that you can afford and save your credit and home it will be worth it.