Most people who borrow hard money do this in distressed financial circumstances. For instance, a homeowner may consider this form of financing when faced with bankruptcy or foreclosure. In such cases, it is easier to qualify for hard money loans than lending from banks since the credit score is not considered. However, the interest rate charged by this type of lender is much higher than what is charged by banks.
Before the lender agrees to give you the loan, the quick sale value of the property must be determined. This value is basically considered as the purchase price of the property in the current market. That is, the amount that the lender will expect in the event that the borrower fails to pay the loan on time. Hard money loans, Boise are then offered at a rate of 60-70% of this quick sale value. This is done to act as security for the lenders to safeguard them against loan defaulters.
The rates in which the hard money loans are given depend on a number of factors. The two main factors are the availability of hard money lending options and the trend in the real estate market. If there is a shortfall in the number of hard money lenders, the interest rates may increase. It may also be that the demand for this type of financing is high, making the lenders increase the rates. On the other hand, a downward trend in the real estate market may result in a fluctuation of interest rates charged when taking hard money loans, Boise.
Most hard money loans are unregulated and quite more expensive than traditional loans. This means that they carry a lot of risk to the borrower. The main risk is losing the property, which was used as collateral. There are also other penalties, which may apply after taking hard money loans, Boise. As a borrower, you are the one responsible for making sure the money you borrow will not lead to a major financial disaster as opposed to helping you out of a financial crisis. You must make sure you read all the terms given by the lender before signing to any agreement. In fact, it is always best to consider the help of a professional attorney who will help you to review the loan documents and clarify every detail.
At the end of the day, it is very easy to lose property after taking a loan, which you were never comfortable with from the beginning.
As a rule of thumb, never take a loan if you think you cannot be able to repay it. Late payments and any other form of default can result to loss of property and great financial strain. Make sure you use hard money loans to improve your financial situation rather than making it worse.
Hard money loans have been used by many homeowners in Boise to help them in financial distress. You need to understand how they work before you consider them.