Important Facts That You Must Be Aware Of Regarding Hard Money Loan
One thing about hard money loan, or better known as private loan money, is the fact that this is a type of loan that can only be attained from sources that are specializing in the construction of the said loan. Furthermore, we want you to know as well that this is a kind of loan that comprises of a first mortgage on a residence that leads to the creation of hard money residential loans. You should know by now that when it comes to the identification of hard money loans Georgia, there are several important factors to be considered.
It is safe to say that first mortgage, which we cited not too long ago, is a very good example of these identifying factors. Due to the fact that the credit history of the borrower will not matter as much as the amount of equity in the property, a first mortgage that has taken an effect will prevent any potential loss of the entire property if, for instance, there is another loan before the hard money loan. We are sure that many of you are wondering about why the credit score of the borrower will not matter and what we can tell you about it is that it is because the lender looks to the property for security and also, they are being paid dearly for the chance they take by basing all the money they get from the value of the property alone.
The next thing that you have to be aware of regarding this matter at hand is the fact that another facet of a hard money loan has something to do with them usually charging very high interest rates and high points as well. You should know by now that if the property you have is secured enough, the high points will become a part of the actual loan you are getting from them. More often than not, the loan is not paid in the usual principle plus interest but more likely, they are being paid in interest only with a balloon at the end of the stated loan period. With regards to this matter at hand, the borrower will be paying interest on interest and due to the fact that points are interest and mortgages are calculated with the inclusion of points, each payment that the borrowers make is paying interest only, therefore the interest on interest.
You can actually say that it is common for hard money lenders in Georgia out there to be careful and cautious when lending hard money thus, they resort to ensuring a careful appraisal is done on the property. They are doing this because they want to protect themselves from the possibility of getting deceived by the borrower or from having to suffer from significant loss if they cannot pay them back. They have to protect their interest as well.