Borrowers of Arizona hard money Mortgages sometimes find themselves frustrated at the high interest rates required of them. However, it is important to step back for a moment and remember how and why they got the Mortgage in the first place.
Hard money Mortgages are equity-based Mortgages that are not dependent upon the borrower’s financial information at all. In fact, approval for a Mortgage does not even take into account employment history, income, or ability to pay. The approval Mortgage is based solely upon the appraised value of the property. Also, Arizona hard money Mortgages tend to be shorter than average bank Mortgages (about 6-36 months) and often Mortgage up to 80% of the property value. Often, these numbers are determined within a matter of hours.
All of those things taken into account, Arizona hard money Mortgages charge a bit higher interest rates because of the significant risk taken on behalf of the lender. These lenders go where banks refuse to go, and they lend to those individuals who would never be Mortgageed to otherwise. They don’t look at a borrower’s ability to pay–they simply trust that that borrower will do what they say they will. That is the main reason Arizona hard money Mortgages sometimes have high interest rates.
Another reason borrowers experience high interest rates is because they are not required to pay any application fees, recording process fees, documentation fees, or closing costs. All of those expenses add up quickly and when taken care of by the lender, need to be accounted for at least slightly by the borrower.
In essence, LTV stands for the Mortgage to Value ratio of an Arizona hard money Mortgage. Most of the time, borrowers can receive up to 80% of the money pertaining to the property value. The LTV in a hard money Mortgage can be as low as 65% at times, as well. The property being purchased with hard money is considered collateral so that there is enough equity in the property should the property go into foreclosure.