Virginia Hard Money Blog

For help deciding which option is best for you, contact your local mortgage professional Brian Piper at 800-844-1015×109 or bpiper@jdmtg.com for a free consultation to decide whether or not a fixed-rate mortgage or an ARM is best for you.If you are considering an adjustable rate mortgage, then when you make sure that your pre-payment penalty does not exceed the fixed period of your loan. Example: If you plan on only living in the house for 2-3 more years and you select a 3/1 ARM, you probably do not want to have a pre-payment penalty that lasts for 5 years.

Traditionally, a borrower who managed their credit well and used an adjustable rate mortgage could save many thousands over the life of their loan in comparison to a fixed rate mortgage. Since early 2006 the US economy has been experiencing a “yield curve inversion”. Short term interest rates have risen above long term rates meaning that a fixed rate mortgage is temporarily the best option all around. However, all indications are that at the end of 2007 short term rates have started going down and ARMs may become a viable option again.

A fixed mortgage can ease your mind of not having to worry about your interest rate rising. This can lead to refinancing, and incurring new closing costs.

Something that you will want to watch out for are the rate differences between fixed rates and adjustable rates before taking on an adjustable rate mortgage. At different times there can be quite a significant gap between fixed and adjustable rates, while at other times the gap can be extremely tiny. Therefore, it would not make sense to go with a 5 year ARM loan instead of a fixed rate mortgage if the rate difference is only roughly an .125% or so. Pay attention and ask your mortgage professional to show you both a fixed and an adjustable rate in order for you to make the best decision as to what is best for you and your situation.

When considering an adjustable rate mortgage, ask your broker if you can get a lower margin. When your rate does adjust following the fixed intro period, your interest will be determined by an index which adjusts and a margin which is set in your contract. A lower margin may cost a little up front, but can help hedge your bet against rising interest rates compared to the fully indexed rate you might have been facing.

Life can throw you curveballs at any given moment. Even if you think you’re going to live in your home forever or for a short time, you can never go wrong with a fixed interest rate.

Right now, fixed rates seem to make more sense than adjustable rate mortgages. This is because short term money and long term money costs are about the same. Many folks right now have adjustable rate loans that recently adjusted upward and are encountering financial difficulties.

Many times with Hard Money loans you will want to payoff this loan within a year or two. Typically, you do not want to hold a hard money loan for the long haul.

Hard money loans are usually a last resort and usually not only carry high rates but unfavorable terms also. Make sure you understand the terms of a hard money loan and you have exhausted all other options before entering into a contract for a hard money loan.

Hard money lenders don’t report your payments to the credit bureaus. Even if you make all of your payments on time, you will not build positive credit.

Hard Money is usually an asset based loan. Most Hard Money lenders will lend a percentage of the fair market value of a property. The percentage can range from 50% to 70%. These loans are great for real estate investors, borrowers with very poor credit, and for foreclosure bailouts.

If all else fails… Your mortgage professional will have access to hard money lenders and will guide you in the right direction.