Taking out loans is an age old practice. In case of a secured loan, the loan amount is backed by some assets. Whereas, unsecured loans are not backed by any underlying asset. You take out loans for a variety of purposes such as for making some real purchases, for debt consolidation or for any gainful purpose. Hard money loans are the loans which are backed by some assets. These loans are mainly issued by private investors or companies. The rate of interest associated with hard money loans is comparatively higher than the interest rate associated with conventional commercial property loans, due to shorter loan duration.
The issuers of hard money loans securitize the collateral to make a loan. After taking a hard money loan, if you default in making payments, then the collateral goes to the hard money lender. The qualifying criteria for obtaining a hard money loans varies from lender to lender. Various things such as income, credit score and criteria for conventional lending are taken into consideration for offering hard money loans. Here we discuss about some major types of hard money loans.
Mortgage refinance
Mortgage refinancing is the replacement of the original mortgage loan with a completely new loan with different terms and conditions. Generally, you opt for mortgage refinancing in case you find it difficult to pay the original mortgage loan. Mortgage refinancing can be done in various ways such as by reducing the rate of interest, changing the term of the loan and sometimes by reducing the principal loan amount.
Home equity loans
If you already have build up equity in a particular home, you can opt for home equity loans. You can secure a home equity loan at a very fast rate. Home equity loan is often regarded as a subordinate loan as it is subordinate to the original mortgage loan. Rules related to home equity loans however vary from state to state.
Bridge loans
Suppose you want to purchase a new home before selling your existing home. In that case, you can take out a bridge loan.
The idea of taking out hard mortgage loans is becoming increasingly popular. Hard money loans can often be used to great advantage in your real estate investment plans. Due to lack of conventional loans, many real estate investors opt for hard money loans as a much needed bridge between the acquisition of a property and permanent financing. Though the hard money loans are not very cheap but they can indeed be very handy. Generally, the rate of interest charged for hard money loans is around 15%. You may however find some private lenders who charge comparatively less.
One important advantage of hard money loan is that it offers you the chance to borrow funds for renovation expenses. With these loans, you can find, acquire and renovate properties. In case of conventional loans, you are required to make 20-25% down payment, but in case of hard money loans you are not required to make such down payment.
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