Resources
Mortgages

Hard Money Mortgages

A Hard Money mortgage is a loan that is secured by real property. The pledge ends when either the mortgage is paid for or the property is taken through foreclosure. You can obtain a loan to purchase a property from a bank or though intermediaries. Features of mortgage loans including the size, maturity, interest rate, method of payment, and other characteristics can vary. It is normal for home purchasing to be funded by a mortgage. Not many people have enough liquid funds to purchase a property all at once.

Hard Money Mortgages have an interest rate, just like other loans, and are usually accounted for over a period of 30 years. Unless they are a balloon that has a earlier maturity time fram. All real property can be, and usually is, secured by a mortgage that has an interest rate that reflects the lender’s risk. Interest rates can be fixed for the life or the loan or can be variable, and change at pre-determined points in time. The rate can also obviously be higher or lower. Mortgages usually have a maximum term in which the loan is supposed to be repaid. The amount paid per period and frequency of payments can vary according to the rules of the loan.

The two basic types of amortized loans are fixed rate mortgage and adjustable rate mortgage. In the United States, fixed rate mortgages are the standard, adjustable rate mortgages are common as well. Sometimes, they are even combined to be fixed rate and adjustable. In that situation, the loan would have a fixed rate for a certain period of time, and then a floating rate after that period ends.

In a fixed rate mortgage, the rate and periodic payment is consistent throughout the life of the loan. Although the payments for principal and interest are fixed, other costs such as insurance and property taxes can and do change.

In an adjustable rate mortgage the rate is usually fixed for some period of time, and then it will adjust up or down according to a market index. These adjustments can take place annually or monthly. In adjustable rate mortgages, some of the risk is transferred to the borrower, which is why they are common where fixed rate funding is difficult to obtain.

A borrowers credit score, also known as a FICO score, is the main determinant of eligibility for loans. More applicants need a score of 660 or higher, but some lenders will not go below 720. Lenders also calculate a borrowers debt-to-income ratio, which is the percentage of the borrower’s income that goes toward paying the debt. Mortgage companies used lend to applicants with debt-to-income ratios as high as 55%, but now, the maximum is in the mid 40s. Most lenders would expect income documentation such as a personal financial statement. Lenders also require a certain degree of liquidity (usually equal to 3 to 36 months of payment).

Do you need a Hard Money Loan for your next real estate purchase or refinance fast?