By Matthew D. Weidner, Attorney At Law, contact information at bottom of page.

These terms refer to non-institutional residential and commercial mortgages which are typically funded by private parties. The mortgages are secured by the equity held in the property against which the mortgage is recorded.

These mortgages are appropriate for many borrowers, including borrowers who have poor credit scores, borrowers who cannot document income and borrowers who do not wish to provide all the documentation required by traditional mortgage sources. The primary consideration in hard money mortgages is the borrower’s equity position. Thus, to qualify for a hard money mortgage, the borrower need only show sufficient equity in the subject property and be able to document the ability to repay the mortgage.

Borrowers can expect to pay between 10 and 15 percent interest on money invested and secured by first position mortgages secured against real property. The interest rate, which is determined by the investor, varies depending upon the equity position of the borrower, the borrower’s credit status and the marketability of the property. While these rates are higher than what borrowers with good credit pay, the additional percentage points do not dramatically raise the borrower’s monthly payment. And, while the higher interest rate may not be acceptable to all borrowers, many accept the higher rate as the price to pay for the convenience and other benefits of a hard money mortgage.

Traditional mortgages are usually serviced by large, impersonal institutions. If you’ve been in the mortgage industry for any amount of time you’ve undoubtedly encountered clients who relate horror stories of institutions losing payments, sending incorrect notices, failing to update files, failing to make exceptions for a borrower’s unique situation, then aggressively pushing borrowers into default. Compare this situation with private money lending which is characterized by a one-on-one relationship with a (usually local) private individual who is just a phone call away. Many borrowers prefer the personal relationship and attention which is characteristic of private money lending.

The majority of hard money loans are taken out for a five year term, however, as with all other terms, the period is negotiable. And, while the note does contain a fixed balloon date, the borrower can always refinance if a better rate can be obtained elsewhere.

Most hard money notes contain prepayment penalties of 3% first year, 2% second year, 1% third year. As with all other terms, this is negotiable.

A hard money mortgage can be closed and funded very quickly, subject of course, to applicable waiting periods. This is the case because an investor need only determine that a borrower has sufficient equity in a subject property and that the borrower can repay the loan in order to make a funding decision. Once the determination is made to fund a loan, it can be closed as soon as the party’s schedules permit.

In most cases, the only documentation that is required to process a hard money mortgage is a completed 1003 Uniform Residential Loan Application. From that application, the investor can determine the value of the property, the borrower’s equity position and confirm their ability to repay the mortgage. Unlike traditional loan sources that require tax returns, bank statements, credit reports and other documentation, these types of mortgages do not require such documentation, which is why they are sometimes also referred to as "no doc" mortgages.

Mr. Weidner practices civil litigation and real estate law statewide out of offices in St. Petersburg, Florida. Mr. Weidner is admitted to the Florida Bar and is admitted to practice in Federal Court, the Middle District of Florida and the Federal 11^th Circuit Court of Appeals in Atlanta, Georgia.

Matthew D. Weidner, Attorney At Law
1229 Central Avenue, St. Petersburg, Florida 337605
Phone 727/894-3159. Fax 727/894-2953

Free Mortgage e-cards

  Send an e-postcard to a friend, loved one or client. FREE You can upload your own picture or that of a listing and send it to many clients.. Many cards have been designed just for the real estate business.. You can even add your logo to the card.