Hard Money Second Mortgages

When a home is worth more than someone owes on it, they can pull this equity out of their home through a second mortgage. There are many different second mortgage loans out there, so learning about the various types can help a person hone in on the type of second mortgage that is right for them. Many people do not know what a hard money second mortgage is, and as such, may not consider one when they are looking to take equity out of their home. Here are several frequently asked questions about hard money second mortgages and the answers. This should help to educate more people about these loans and help them determine if this is the best option for their needs.

Frequently Asked Questions ( 8 )   Add a Question

  1. What is a Hard Money Second Mortgage?
    Reply

    A hard money second loan allows you to take the equity out of your home and get cash for it. You can then use this cash as a down payment on another home, to complete renovation projects, to buy a car, fund a trip or pay down some of your outstanding debt. Basically, you can use the money for anything you would like.

    Best Answer
  2. How Much Money Can You Get With a Hard Money Second Mortgage?
    Reply

    Most lenders who offer hard money second mortgages will allow you to borrow 50 to 70 percent of the profit in your home. For example, if your home is worth $200,000 and is paid off, you can typically borrow $100,000 to $140,000 dollars. If your home is worth $200,000 and you still owe $100,000 on it with a conventional mortgage, you can borrow $50,000 to $70,000 with a hard money second mortgage.

    Best Answer
  3. How Does a Hard Money Second Mortgage Compare to a Home Equity Line of Credit?
    Reply

    The biggest difference between a hard money second mortgage and a home equity line of credit is that you are getting cash or a check for the agreed upon loan amount. It is much more like a mortgage than a credit card, where you have a set payment each month, rather than a payment based upon how much you owe on a credit card each month. Additionally, many home equity lines of credit are based on your credit score, whereas hard money second mortgages are based more on the amount of equity in your home.

    Best Answer
  4. Does I Need Good Credit for a Hard Money Second Mortgage?
    Reply

    No. Hard money lenders are often perfect for those who have bad or less than desirable credit. As long as you have equity in your home, a hard money lender will work with you. This is a great way to get a loan if you have less than perfect credit.

    Best Answer
  5. What are the Advantages for a Hard Money Second Mortgage?
    Reply

    There are many advantages to a hard money second mortgage. As was mentioned above, you don't have to have great credit to get this type of loan. This type of loan also allows you the ability to use the money for whatever you desire, whereas some second mortgages can only be used for renovation purposes or other specified reasons. Lastly, this is a great way to take the equity out of your home and use it to buy a new one, as many lending companies are no longer issuing bridge loans since the housing market collapse.

    Best Answer
  6. What Are the Disadvantages to a Hard Money Second Mortgage?
    Reply

    As with any type of product there are pros and cons. The biggest downside to a hard money second mortgage is that you can't take the full value of your equity out of your home. Most lenders cap you at 50 to 70 percent of the amount of equity you have. When you take out other home equity loans or second mortgage type loans, you may be able to pull out 90 to 100 percent of the equity in your home. Secondly, hard money loans can have high interest rates associated with them, as they are not based on a credit score.

    Best Answer
  7. Can Someone Lose Their House If They Default on a Hard Money Second Mortgage?
    Reply

    If you default on the loan, your house can be foreclosed upon to cover the costs of the second mortgage. As such, if you are considering taking out a second mortgage, whether it be a hard money loan or a more traditional loan, make sure you can afford the payments so you are not put in a position where you can lose your home.

    Best Answer
  8. Do Interest Rates Vary For Hard Money Second Mortgages?
    Reply

    Yes. Interest rates do vary for hard money second mortgages based on the company or private lender loaning the money. Always take your time to do your research and find out what interest rate various companies are offering. The interest rates may vary based on the amount of money you are taking out, the value of your property, if you still owe money on your property, your credit score and your income.

    Best Answer