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Hard money lenders would consider lending in this situation if they can be assured that, should the loan go into default, they can sell the house, pay off the first mortgage and still earn a ...
The loan amount the hard money lender is able to lend is determined by the ratio of loan amount divided by the value of the property. This is known as the loan to value (LTV). Many hard money lenders will only lend up to 65% of the current value of the property. [3] There is no such thing as 100% LTV for this type of transactions.
A prepayment penalty is a fee designed to discourage borrowers from paying off a loan ahead of time. Refinancing your mortgage or selling your home could trigger this penalty.
The hard money lender approves a loan in the amount of $170,000 — well within the typical loan limit of 70% of after-repair value. The loan term is 12 months, and the lender charges a 15% fixed ...
Penalty interest, also called penalty APR (penalty annual percentage rate), [1] default interest, interest for/on late payment, statutory interest for/on late payment, [2] [3] interest on arrears, or penal interest, in money lending and in sales contracts is punitive interest charged by a lender to a borrower if installments are not paid according to the loan terms.
As another way to compensate for prepayment risk (which is a reinvestment risk), a prepayment penalty clause is often included in the loan contract. [2] "Soft" prepayment terms can allow prepayment without penalty if the home is sold. "Hard" prepayment terms do not allow any exceptions without penalty.
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