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Hard money loans - Is it a good option for refinancing?

If you are finding it difficult to pay your mortgage then it is time that you refinance your mortgage loans. There might be many reasons for which you may find that a mortgage that was once affordable for you is not so any more. You might have a drop in income which can cause a problem for you in paying your mortgage or you may have a fixed rate mortgage and the current interest rate that is prevailing is very low and so on. Whatever maybe the reason for your refinancing, it is a good idea if you are facing difficulties to pay your mortgage and are on the verge of defaulting. This is because mortgage is a secured loan with your house as collateral. If you fail to pay back your mortgage your house will be taken away and foreclosed while you will also lose out on all the mortgage payments you have made till date. However, there might be times when your credit is already impaired with multiple debts and as a result you are not getting a loan to refinance your mortgage. At such times you can consider refinancing with a hard money lender.

What is refinancing with a hard money loan?

Hard money refinance loan is a loan that is financed by a private investor or an investment firm. These loans are usually short term solutions for immediately avoiding foreclosures. This is not a much appreciated option, however as more and more Americans slide toward foreclosure this is good enough option to save your home.

When is refinancing with a hard money loan a good option?

There are two significant cases where refinancing with a hard money loan is a good option. These are given below.

Refinancing with a hard money loan is a good option for you if you are facing a foreclosure. The main reason for this is that these loans are funded very fast. The application process and approval of hard money loans take place at a much shorter span of time as compared to a traditional refinancing mortgage. Thus hard money loans can actually save your home from being auctioned off.

Refinancing with a hard money loan is a good alternative if you are a home owner with a credit score that will not allow you o refinance with a conventional lender. Many a time your credit score might be so bad that you can't even refinance with a subprime lender. Usually the cut off for subprime lending is a credit score of 500. If you dip below that the only option that is available to you is a hard money loan.

What are the interest rates for hard money loans?

Hard money loans are not preferred by most people as they have a very high interest rate. You should only take a hard money loan when you have no option left. Usually the interest rate for hard money loan ranges from 10% to 18% and varies from one lender to another. However, the amount of equity needed in your home to get a hard money loan remains constant. Most hard money lenders will lend about 65% to 70% of the appraised value of your home. This factor varies according to the place you live and the investors. Hard money lenders will also charge you points. These points are a way for the hard money lenders to make more money. Usually the average points for a loan which is for a residential mortgage is 5-7 points. 1 point is 1 % of your total loan amount and this can get quite expensive if your house is on the larger and more expensive side.

Thus you now know when to take a hard money loan and when to avoid.

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