The sub prime mortgage market boomed at the beginning of the new century. Borrowers found mortgage companies friendly, even when they could offer no proof of employment and had low FICO scores. All across America, from shore to shore, easy home ownership was suddenly possible.
One thing borrowers did not take into consideration was that the mortgage was an adjustable mortgage rate. This meant that the original interest rate was only for a short time. It was a teaser. What new home owners considered affordable changed over time, sometimes significantly. Not surprisingly default rates rose and foreclosures hit an all time high; higher, in fact, than it had been for two decades.
Since the mortgage companies could not sell the mortgages to Wall Street investors, who did not want houses in foreclosure, the borrowers found themselves cut off from further funding. The once friendly mortgage companies were now suddenly stricter in their policies.
Although the situation for many homeowners is bordering on desperation, borrowers can find a solution to their financial woes through hard money loans. This is a short-term solution where lenders are willing to loan money based on the property value. The amount loaned is calculated on an LTV ratio, a loan-to-value assessment, and this is around 75 percent.
What the borrower gains through this arrangement is time. This time can be leveraged to prevent foreclosure, giving the lender a few options, like selling, renting, or refinancing the home.
Private lenders make hard money loans. Because they take the risk of a possible loan default, the interest is high, often more than 10 percent. And a second mortgage based on hard money is even higher.
A hard money loan is a viable option if the borrower has an exit plan and the support to fully execute it. This strategy ensures that the loan is paid off and may even result in another loan at a later date.
The Hard Money Team can offer essential information on hard money lending. They can be contacted at 512-692-4195. Call them today for more information. You can also visit their website: www.HardMoneyTeam.com
