Nothing is certain in our economy these days. Many people and businesses are still in quite good shape, but plenty of others haven't been so lucky, and have had to close their businesses, and have filed bankruptcy or been foreclosed upon. And now, unfortunately, sub-prime mortgages aren't available for assistance they way they used to be, due to the recent subprime mortgage crisis. It's become much more difficult to know where to turn when it's your financial future at stake.



If you're one of the unlucky, stuck between a rock and a financial hard place (or a bankruptcy and a foreclosure, as the case might be), it may be to your advantage to examine the prospect of taking out a hard money loan. Many people facing foreclosure or similar financial struggles utilize hard money loans, as the lending criteria tends to be more relaxed than that of conventional loans. While your credit history is still taken into consideration by the lender, it's typically not judged as harshly because the loan is given based on the value of real estate property you already own. Due to the slightly higher risk to the lender when dealing with hard money loans, they are not provided by banks but rather by private lenders, and as such, the interest rates of these loans aren't based on bank rates. Hard money interest rates typically range from 15% to 25% (a bit more than bridge loans, which are nearly the same, but not so specifically used in times of financial difficulty), which means you won't want to looak at a hard money loan as a long-term financing solution. The term is, in fact, often fairly short. Decide carefully if you'll be able to afford the loan, as interest rates upon default may increase to the state limits, as high as 25% to 29%.

Typically the value of a hard money loan is about 65% - 70% of the value of the property. This is known as the LTV (Loan-To-Value). The LTV, on average used to be a bit higher than it currently is, but due to property value overestimation in the 1980s and 1990s, the LTV was lowered, and interest rates raised. Hard money lenders do usually want to be in "first lien" position (this means that their lien would take priority over any others) on a property, so if the value of that property isn't enough to cover your existing mortgage, the loan would need to be cross-collateralized with another one of your properties. Often, these cases are called "blanket mortgages."

It's important to review your financial situation thoroughly when considering taking out a hard money loan, and it might benefit you to talk to a certified mortgage planner before you make the choice to do so. In the right circumstances however, a hard money loan may be what it takes to tide you over, and keep your business from going under.