If you say private loan money, you are referring to hard money. These loans come from hard money lenders that specialize in structuring loans. Most of the time, a hard money loan comprises your first mortgage on your residence, thereby giving the name hard money residential loans. There are many factors that come into play to identify a hard money loan. If you are planning to get this kind of loan, make sure to learn as much as you can about it first.
One of the features of a hard money loan is that it is going to be your first mortgage. The amount of equity that you get from the property is what counts for this kind of loan. The credit standing of the borrower does not matter as much for this kind of loan. The borrower will not be losing all of his or her property because of the first will in effect. Take, for example, another loan comes first in comparison to the hard money loan. Hard money lenders don’t focus as much on the credit standing of the borrower because they only have their eyes on the property for its security. In return, the lender is being paid significantly for taking the chance to lend money depending on the value of the property alone.
Taking on a hard money loan means that the lender will be charging borrowers with very high points and interest rates. You can expect the high points to go into your actual loan if your property is considered secure. In terms of payment, paying this loan does not involve the usual principle plus interest rate. With this kind of loan, you will be paying the interest only, which might include additional charges once the declared loan period is done. As a borrower, you will be paying for this loan using your points as interest, which implies paying your interest over your interest. You can expect that the calculation for your mortgage includes your points. Therefore, as a borrower, each payment you make is only paying your interest.
When it comes to most hard money lenders, they make sure to do a careful appraisal of your property. They do this to ensure that they can protect their private money. The loan to value ratio of your property is something that these lenders make sure to consider. This ratio is simply the percentage amount that your loan will be if you put it against the present value of your property. Take, for example, your property is appraised at $100,000 on a 70/30 LTV. Looking that these numbers, you can expect the lender to only let you borrow $70,000 from the value of your property.
These days, you can choose from a range of hard money lenders. Make sure to go with lenders who have been in the business for quite some time and are reliable.