Assessing the Risk of Hard Money Mortgage Lenders

Hard money mortgage lenders provide mortgages to at-risk borrowers. Sometimes called “subprime mortgages,” these loans may be the bad credit borrower’s only mortgage option, but they are not without risks.

The Cons

Before you consider a hard money mortgage, consider the cons of such a loan. They include:
  • your ability to pay – If hard money mortgage lenders are the only lenders willing to give you a loan, you likely suffer from bad credit. If you have been unable to pay your debts in the past, you may be unable to meet your monthly payment, which may result in your home being foreclosed.
  • high interest –Buying a home with a hard money mortgage means that you’ll be paying much more long-term than you would with a prime mortgage.
When to Borrow

Hard money mortgage lenders are not without their advantages for the committed borrower who has assessed all of the risks of taking out a hard money mortgage loan. Borrow when you can follow these tips:
  • you’re honest about your personal risk – Hard money mortgages aren’t sources of free money. They’re risky loans that can result in you losing your home. You should only take out a mortgage if you completely believe in your ability to repay the loan.
  • you consider unforeseen circumstances – Don’t take out a mortgage unless you have another means to make the monthly payments should you or your spouse lose a job or become unable to work for a time.