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[QUOTE]Originally posted by rickpic: [QB] Typical Rates and reasons! Despite the pitfalls, lenders say that hard money loans can provide borrowers a lifeline in times of need. Consumers just need to make sure their loans will help get them out of debt, not bury them even further. "If a property in a subdivision is worth $100,000, the loan-to-value on a hard money loan may be 50 percent to 65 percent, so maybe $65,000 maximum on a first mortgage is loaned against the property" to pay off the old lender who's preparing to foreclose, says Robin Snyder, president of Mortgage Bankers Ltd. in Baltimore. "That does not mean that that customer can't take the property and sell it tomorrow for $100,000 and reap the benefits of that additional $35,000," he adds. "A person is better off paying 14 percent, or a higher rate than the normal rate of 9 or 10, to keep the property rather than lose it. Or say you don't get $100,000 for it, you get 90. Ninety is better than zero." 'Hard money' loan costs and terms What does a typical hard money loan cost? That's hard to say because there really is no "typical" transaction. But someone trying to avoid foreclosure might run into the following terms: Interest rates: 12 to 18 percent Balloon payment: typical, usually due after 1 or 2 years Loan position: must be a first mortgage, not second Maximum loan-to-value ratio: anywhere from 50 percent on up to 70 percent Points: 4 to 8 Assuming the worst rate and point structure possible, a $100,000 loan could cost as much $8,000 up front and $1,507 a month in principal and interest payments. Borrowers who don't want to end up paying such steep prices should contact their lenders at the first sign of trouble making payments. They may be able to work something out and avoid foreclosure. SOURCES: Kirk Johnson, mortgage broker, Sierra Funding Corp.; Robin Snyder, president, Mortgage Bankers, Ltd.; Brandon Thompson, private money broker. [/QB][/QUOTE]
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