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Hard Money Loans - Reasons Why You Might Want To Try Applying With A Subprime Mortgage Lender
By: Carrie Reeder
Before you apply for a hard money loan, try applying with a subprime mortgage
lender first for lower rates and fees. Hard money lenders charge excessive fees
to high-risk borrowers, but will only lend 50% to 75% of the value of the
property. On the other hand, subprime lenders offer loans to similar high-risk
groups, but with better terms.
Lower Rates
Subprime lenders specialize in B, C, and D class loans. Even with a bankruptcy
in your financial records, you can still be approved for a mortgage with a
subprime lender. To protect themselves from the higher risk of foreclosure,
subprime lenders charge a couple of interest rates higher with additional fees.
Hard money loans are funded by private individuals, who require high interest
rates somewhere between 12% to 18%. This is nearly double what a reputable
subprime lender would typically charge. You can also expect to pay higher fees
upfront with hard money lenders.
Reasonable Terms
Subprime lenders offer mortgage loans similar to that of traditional mortgage
lenders. You can expect regular payments and terms, such as no early payment
fees. Subprime lenders also require smaller down payments, even zero down if you
have a FICO score of 600.
However, hard money lenders may require a balloon payment in one to two years or
other difficult terms. Hard money lenders also require as much as 50% of a down
payment for the loan to ensure they will make a profit even if they foreclose on
the property.
Refinancing Option
Subprime lenders also offer refinancing, unlike hard money lenders. Many
subprime lenders will automatically offer refinancing after three years of
regular payments so you can reduce your mortgage interest rates or tap into
equity. Hard money lenders are interested in high profits, so they will only
deal with high interest rates and terms profitable to them.
The Reason For Hard Money Loans
Hard money loans have their place in the financing world. Primarily used for
property speculation and development, hard money loans make sense for short-term
borrowing. They can also be successfully used for purchasing non-traditional
properties such as ranches, where the property value is not realized by a
traditional bank.
About the Author:
Carrie Reeder is the owner of http://www.abcloanguide.com, an informational
website about various types of loans. To view our list of our most recommended
subprime mortgage lenders online, visit this page: http://www.abcloanguide.com/lessthanperfectcredit.shtml |
