Overall Understanding Of A Hard money loan For Our Locations
What one should know is that a “hard money loan” is pretty much a short term loan taken out by a borrower towards a property to finance the purchase of a current or older property
One may have heard the term swing loan, gap financing, or interim financing, though they all mean the exact same thing, simply said, hard money loan. A hard money loan under normal circumstances is good for a six month period though it could easily be extended for longer than that. The interest rates on a hard money loan varies, depending on the property type, location, and other factors.
Hard money loans are generally taken out when a borrower wants to upgrade their current residence, though still have their current home and are stuck in between where the normal bank financing will not lend due to max credit risk. A hard money loan simply said “bridges the gap” between the time the old property is sold and the one that is being planned to purchase now is complete.
Home Buying Contingencies
When one looks carefully into a purchase contract, you will notice the many contingencies allowing a buyer to agree to these terms within the contract but only if specific actions take place. A good example of such is when a potential buyer will decide not to go through with a purchase of a new property that they are currently under contract with, unless their first house is sold first. In turn, what this does, is it gives the purchaser special protection in case someone else purchases their house, or lets say that there is no one else that will purchase that property with the terms that are outlined within the contract.
In such a case when the one selling the property refuses to accept the purchasers contingency then a hard money loan will be the only way to get proper financing on the new home, unless they could get the cash elsewhere.
Understanding How A Hard money loan Works?
There are many ways one can properly structure a hard money loan. One way is to have in pay off a current lien on a property one might own, in full, and another one is to have it act as a secondary loan on a current lien/property. In this case, the hard money loan will pay off any other liens that may be on that specific property and you can use the rest of the money left over towards a down payment of a new property or home. Understanding this, the hard money loan is then opening and operating just like a second or other type of mortgage and will be specifically used for your down payment of that property.
Going with the original solution, you will not make any monthly payments on the hard money loan you have acquired, though you will simply make consistent mortgage payments on your new purchase. The good thing about this is that once you are able to sell your older home, you can then move forward and fully pay off the hard money loan without payment any penalties whatsoever so long the contract is seasoned.
Going with the last option will require you to make the payments on your older mortgage in addition to the new mortgage that is on this home, what this will do is pretty much stretch your overall budget. In such a case you want to assure that one that chooses this option can make those payments for at least 12 months if that is the term of your hard money loan agreement.
One Must Understand That Hard money loans Can Be Risky At Times
If you ask around, most people that heard of a hard money loan will tell you that it is a risky proposal, the reason for that is because the interest rate is much higher on a hard money loan than conventional financing, and who is to say that you will be able to sell the older home in time? For this reason a worry on some minds call such a loan a risky one. One tends to happen in many cases that the one assuming the loan may not need to pay any interest whatsoever for the remaining months of that loan taking into account that the house is old prior to the term of when the hard money loan expires or is over. Just assured that the loan is fully seasoned to avoid any penalties of early pay off.
Contacting us to get you the proper hard money loan for your needs is your best bet. We are very well trained and educated, we have all the proper resources, and can get you to close quickly. Hard Money Loans Brooklyn is your New York solution for any hard money loan type you may need, for whatever circumstance you are in. Simply give us a call today at: 718-889-1041 or contact us here. We look forward to helping you succeed in granting you the loan you need.