There are a lot of noteworthy facts about hard money loans that you should be well aware of before you decide to take one out. A few things that you should know about this type of loan is that it comes at a high price and is difficult to come by. If you can afford to take out this loan, then you should know that it will be your last resort.
Before taking out hard money loans, you have to first distinguish them apart from your conventional loans. An important fact about conventional loans is that they are often what homeowners get if they intend to purchase a house. Lending companies let buyers borrow money by looking at their income and credit history. Hard money loans, on the other hand, don’t consider the credit score of the borrower. These loans focus more on the assets of the borrower. Never think that you can substitute one loan from the other. When buying a house, bear in mind that you have a lot of loan options out there. Choosing between hard money and conventional loan should not be one of them. Taking out a hard money loan is often intended for distressing situations.
Getting a hard money loan often means going to a private lender. With private lenders, they have the time to assess the entire situation that the borrower is in, unlike traditional lenders. Private lenders are very much aware that having a couple of missed payments due to employment loss is in no way meaning that the borrower cannot repay their loan. This is the part where hard money always comes in. Private lenders often come in when a homeowner is still unable to catch up on his mortgage even if he has a new job and started repaying the his loan. These lenders come in and offer assistance to these individuals by paying off the original mortgage amount. In short, these loans are offered to borrowers who want to start afresh and keep their credit standing good. As the months progress, you can slowly improve your credit report by repairing the damages of missing out on your house payments. You may further refinance your house or any loan you’ve taken out through traditional means.
You have to consider refinancing as fast as you can because you will have to deal with stiff terms when you get hard money loans. With hard money loans, average interest rates range between 10% and 18%. Clearly, these loans are expensive and should be your last option. Of course, it can be of value to you as long as you use this type of loan properly and select a reliable private lender that offers it.