Hard Money and Subprime Loan
Hard money and subprime loan though represent a similar kind of loan yet the features of these loans may vary according to the circumstances. Hard money and subprime loan can be availed from the same type of financing agencies such as banks, mortgage companies and private lenders.
While subprime mortgage is meant for the borrowers who have poor or bad credit history, who can’t give down payment, and can’t submit their income proof. These borrowers consider a higher risk to the lender so in this case lender demands higher interest rate from the borrower. As compare to any other traditional loan the interest rate and fees of a subprime loan are higher. The rate of interest in a subprime loan depends on the borrower’s circumstances and it can be varied from slightly above from market interest rate to a high difference between market interest and its interest rate.
In subprime loan you may have to pay hundreds of dollars more against interest payment than the interest rate of a traditional loan, besides the unreasonable prepayment penalties and annual percentage rate are also more than conventional mortgage. Lenders may consider you in subprime category yet you should compare your financial & credit status with various lending institutes’ policies and apply for subprime loan.
Hard Money loan can obtain easily than a subprime loan. This is the last help for a borrower to take loan if he/she fails to avail other conventional loan. Real estate investors prefer to take hard money and also repay the amount before it gets delayed. Hard money can be availed against the homeowner’s equity in the property. Minimum 40% to a maximum of 70% of appraised value of the property can be availed as hard money loan.
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