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Foreclosure bail out mortgage - a hard money loan - saving your house?

Mon Mar 10, 2008 10:03AM | By Tony

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I have to state right here that in my humble opinion, a foreclosure bail out mortgage is suicidal, and if you are looking for one, you may be better of to look for other alternatives, which we will cover in coming days. Most companies engaged into hard money loans see your bad fortune as an opportunity to strip any remaining equity from your home, leaving you both homeless and penniless. To put it simply, they smell blood and go for it. Can you blame them? One man misfortune is the other man golden opportunity. Of course, carefully read the small print and get a qualified real estate lawyer to see the paperwork, but in the end, you are going to get screwed regardless, as the terms of a hard money foreclosure bail out mortgage are simply too brutal. Foreclosure bail out mortgage is a new short term, balloon type loan used to paid off a delinquent mortgage. This is usually a hard money loan with the interest rates in a range of 12 - 18%. You can expect to pay up to 6 points. If these facts haven't scared you, then read on.

In order to qualify you must have sufficient equity and these uncertain days, most of hard money lenders are looking for at least 65% maximum Loan To Value or LTV. You can however, still find a foreclosure bail out mortgage even if your LTV is 75%, but these are becoming scarce. You must understand that a hard money loan is an asset-based loan issued by local private investors, where you, a borrower, receive cash secured by the value of your house under very tough terms. Also don't think that when calculating your LTV, a potential hard money lender will look at recent sales in your neighborhood and take 100% for the value. More like 80% as they are expecting you to default again and to fire sale your house. If your neighbor sold his house for $200,000, you will get your foreclosure bail out mortgage based on $160,000 which is 80%. So to qualify, your existing loan should be no more than $160,000 x .75 which is $120,000.

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