Hard Money

Hard Money lending is popularly used by individuals who do not fit within the parameters of the conventional lending industry, or whose needs are highly specialized. Hard Money loans are often referred to as hard equity loans, because unlike a conventional mortgage, which focuses primarily on the credit score and mortgage history of the applicant, a hard money loan is focused primarily on the equity you have in the property.

Most hard money lenders will lend up to 70% of the value of your property, whether it is for a new construction or to save you from foreclosure, without looking at your credit. The rates which they charge are generally higher than those you would expect if you qualified for a conventional mortgage, and the closing costs are generally higher because of the risks involved in lending to a person or party without qualifying credit.

Hard Money mortgages are short term loans, which are intended to be used from 6 months to 3 years to fulfill a specific purpose.

Most true Hard Money or Hard Equity mortgage products are interest only, meaning that you would not have to pay the principal on the property while you were in the hard money loan.

Many borrowers choose to refinance using a hard money or hard equity loan when their credit scores fall below 500. This is permissible provided that the borrower benefits from the refinance, for example in cases where they face foreclosure or when it is possible to refinance and take cash out to consolidate their credit card debts, thereby potentially improving their credit over time.

Hard money or hard equity refinances are very popular amongst borrowers who are facing foreclosure, because they cannot qualify for conventional loan programs once they have become 120 days late on their mortgage.

Hard money loans are usually a bit higher in interest rates, but the good thing is they offer the client more flexibilty when financing or refinancing a home.

Hard money lenders tend to scrutinize the appraisal very closely, as the equity in the loan is a key factor in the transaction. Most hard money loans require an appraisal review or BPO- Broker Price Opinion. Be prepared for any appraisal or value estimate you have to be reviewed closely.

» DISCLAIMER: The information contained in this article on 'Hard Money' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.