What is a Hard Money Loan?A type of loan that is secured by real property is termed a hard money loan.

Hard money loans are regarded as loans of “last resort” or short-term bridge loans.Primarily used in real estate transactions, the hard money loans are not transactions with the banks but with lenders who are individuals or companies.How to get a Hard Money LoansThere are terms based on the value of the property that is being used as collateral for the hard money loan and not dependent on the creditworthiness of the borrower.As traditional lenders, like the banks, do not make hard money loans, the private individuals or companies are hard money lenders who are ready to take potential risks in this type of venture.Property flippers who plan to renovate and resell the real estate that is used as collateral for the financing can be sought for hard money loans.The collateralized property is sold by them in a year’s time so the money can get rotated.Depending on the borrower’s intends to pay off the loan, the higher cost of a hard money loan is offset.These hard money loans are for a period of one to three years.Hard Money Loan RequirementsThe cost of a hard money loan to the borrower is always more than what could be available through banks or government lending programs, because of the higher risk that the lender is taking by offering the financing.But for some borrowers who are in a hurry for funds, the increased expense is a tradeoff for faster access to funds, also a less stringent approval process, and potential flexibility in the payment plan.Hard money loans are used in turnaround situations, short-term financing, and when borrowers have substantial equity in their property but bad credit history.A hard money loan can be used as a way to push off foreclosure because it gets issued quickly.The Benefits and Costs of a Hard Money LoanHard money loans have their own set of pros and cons related to the process of approval, the loan to value (LTV) ratios, and interest rates.The Advantages of Hard Money LoansThe approval process of a hard money loan is, much quicker than that of a mortgage or other traditional loans that are moved through a bank.The lenders of hard money loan whom private investors can make decisions faster because they are focused on collateral instead of the applicant’s financial position.Lenders spend less time spent on combing through a loan application, verifying income, and reviewing financial documents is not there so the lender doesn’t require a lot of time for approval.The process will be far smoother if the borrower has an existing relationship with the lender.Because of a greater value and opportunity for reselling the property themselves in case of default the hard loan investors aren’t too concerned with receiving repayment.The Disadvantages of Hard Money LoansBecause the property itself is used as the only protection against default, hard money loans usually have lower LTV ratios compared to traditional loans.The interest rates of hard money loans are usually higher.

Compared to subprime loans the rates are higher for hard money loans.In 2020, the average interest rate for a hard money loan was 11.25%.

Last year the rates varied between 7.5% to 15% in the whole of the country.Because of regulatory oversight and compliance rules, there is a possibility of hard loan lenders not provide financing for an owner-occupied residence.ConclusionPrimarily used for real estate transactions hard money loans are money from an individual or company and not from a bank.A hard money loan is taken out for a short time, When a borrower wants to raise money quickly it attracts higher costs and lowers the LTV ratio.The hard money loans rely on collateral instead of your financial position, the funding is done quickly.A lender and the borrower can often negotiate the terms of hard money loans.

If a borrower defaults the lender still is in a profitable position.https://www.compareclosing.com/blog/what-is-a-hard-money-loan/

About Mortgage LendersWhen we go ahead with the home buying process it is confusing and a little intimidating to shop for a lender.choosing from so many companies and types of lenders could be difficult.

A borrower would need to shop at a few lenders to get the best loan offer.Many mortgage brokers and mortgage lenders charge a fee of 1% of the loan amount.

However, mortgage lenders charge higher interest rates which are negotiated by some brokers for an up-front fee to the borrower in exchange for their services.Before going ahead with a prospective broker they need to be asked how much they charge and who pays for the fees.How do the brokers help?A borrower saves time and effort because the mortgage brokers can help by shopping multiple mortgage lenders for the borrower.If the borrower needs a loan with a low down payment requirement or if his credit is not so great then the brokers can look for lenders that offer products tailored for such situations.

Brokers typically have well-established relationships with lots of lenders.Their connections can help the borrower to score competitive interest rates and terms.

With their focus only on home loans, direct lenders have more flexible qualifying guidelines and alternatives for borrowers who have complex loan files.Just like retail lenders, the direct lenders, offer only their own products so one needs to apply to multiple direct lenders for comparison shop.The only potential drawback if you prefer face-to-face interactions is that many direct lenders operate online or have limited branch locations.Portfolio lendersBorrowers’ are funded for their loans with their own money by a portfolio lender.

Shortly after closing the wholesale lenders usually sell their loans on the secondary market.Correspondent lendersWhen a borrower’s mortgage is issued the correspondent lenders come into the picture.

What Is the Mumbai Interbank Bid Rate (MIBID)?A synthetic benchmark interest rate used by banks in the Indian interbank market is referred to as Mumbai Interbank bid rate (MIBID).MIBID is the rate that a bank uses when it wants to borrow funds from another participating institution.The Mumbai Interbank Bid Rate is used to set interest rates in the financial market.In 1988 the National Stock Exchange of India (NSEIL) launched MIBID along with the Mumbai Inter-Bank Offer Rate (MIBOR) and the rate is calculated daily as weighted averages of interest rates of a group of banks.When customers, are offered loans by banks they are charged interest on them.Likewise, when a short-time loan is offered by a bank to another bank or to any other financial institution, interest is charged on that loan.This interest rate varies from bank to bank, depending on their policies.

But, it is benchmarked to the MIBID value.Understanding the Mumbai Interbank Bid Rate (MIBID)Depending on the interest rate that participating banks pay to one another the Mumbai Interbank Bid Rate is calculated.Initially, MIBID was launched for the overnight call money market.

But later on popular demand, it got extended to term money for 14 days/1 month/3 month durations.Each day the MIBID is calculated as a weighted average of interest rates on at least 10 cleared money market transactions of five billion rupees occurring between 9:00 and 10:00 a.m. on any given day.Varying from the weighted average rate + 3* standard deviation and weighted average rate — 3* standard deviation, the rate range is calculated.Trades taking place at rates outside the maximum and minimum values will be considered as outliers and will be excluded from the computation process.The MIBID rate as a deposit rate is always lower than the interest rate charged to those banks that are wanting to borrow funds.The rate of interest charged by a bank on a short-term loan to another bank is called the offer rate.This provides the bank a profit from the spread of interest earned and paid.As banks try to pay less interest on funds that they borrow from depositors the MIBID is comparatively lower than the MIBOR.The banks try to get more interest on the funds that they loan out, to profit from the spread.For Indian overnight lending rates the MIBID and MIBOR together, constitute a bid-offer spread.History of the Mumbai Interbank Bid Rate (MIBID)On June 15, 1998, the MIBID and MIBOR rates were launched by the Committee for the Development of the Debt Market, as an overnight rate for the Indian banking sector.Right from the time of their launch MIBID and MIBOR rates have been used as benchmark rates for the majority of money market deals made in India.Initially, MIBID was established as the Indian overnight call money market.It was later broadened to include term money for durations of two weeks, one month, and three months because of popular demand.In addition to the existing overnight rate with the collaboration of the Fixed Income Money Market and Derivatives Association of India (FIMMDA), in June 2008 a three-day FIMMDA-NSEIL MIBID-MIBOR combined rate was introduced.The Reserve Bank of India announced in July 2015, that the methodology for the FIMMDA-NSE-Overnight Mumbai Interbank Bid/Offer Rate (Overnight MIBID/MIBOR) benchmark in India would be revised with the introduction of the FBIL-Overnight MIBOR on July 22, 2015.A new company, the Financial Benchmarks India will administer the FBIL-Overnight MIBOR which is based on actual traded rates.Based on polled rates, the existing benchmark is set by the FIMMDA and the NSEIL.ConclusionThe Mumbai Interbank Bid Rate is a benchmark interest rate that is calculated as a weighted average of rates provided for large bank deposits by other banks in India.It is used as a reference rate to set other market interest rates and to other well-known interbank rates.For short-term loans between Indian banks, MIBOR, MIBID is paired with a corresponding interbank offer rate.https://www.compareclosing.com/blog/about-mumbai-interbank-bid-rate-mibid/

About Mortgage BrokersA mortgage broker assists you with the application of your loans, finding competitive interest rates, and thereafter negotiation the terms.Who is Mortgage Broker?A middleman who works with you and potential lenders is called a mortgage broker.A mortgage broker compares mortgage lenders on your behalf and finds the right interest rates according to your needs.Mortgage brokers work with many lenders, so they can make your life easier.Mortgage brokers are licensed financial professionals who do a lot of the legwork for you to find the ideal home.They help you apply for loans by gathering your documents, pulling your credit history and verifying your income and employment, then using all the above information to negotiate mortgage terms within a short period of time.After you settle on a loan and a lender that works best for you, the mortgage broker gets together with the bank’s underwriting department, the closing agent or the title company, and your real estate agent so that the transaction runs smoothly till your loan closing day.How does a Mortgage Broker Get Paid?Usually, the mortgage brokers are paid by lenders, or sometimes by borrowers, but by law, never both.Mortgage brokers are forbidden by a law called the Dodd Franck Act from charging hidden fees or making the borrower compensate with his interest rate.A borrower can choose to pay the mortgage broker themself.

This is called “borrower-paid compensation.”Borrowers should shop around for mortgage brokers and find out what would be their fees be, typically 1% to 2% of the loan amount is what a mortgage broker charges.What the mortgage brokers charge will depend on the market competitiveness and home prices in that area.The maximum level of compensation is limited by Federal law.Are Mortgage Brokers the same as Loan Officers?No mortgage broker is different from loan officers who are employees of one lender and are paid set salaries along with bonuses.The loan officers can only write those types of loans which their employer chooses to offer.While a mortgage broker, can work independently or with a mortgage brokerage firm, a mortgage broker deals with many lenders to find the right loans for their clients.Borrowers can access a broad selection of loan types when they work with a mortgage broker.Why is a Mortgage Broker Right for You?When you work with a mortgage broker you can save time otherwise it can take many hours to apply for preapproval with different lenders, he also handles the back-and-forth communication involved in underwriting the loan and ensures that the transaction stays on track.A mortgage broker can save you from all the hassle by managing the process effectively.Whether you choose a lender through a broker or directly pay close attention to the lender fees.On-Page 2 of your Loan Estimate form in the Loan Costs section under “A: Origination Charges” be aware of the fees.Now from each lender take the Loan Estimate and place them side by side to compare your interest rate and all of the fees including the closing costs.It is the best way when you compare side by side among different options to make the right choice because buying a home is the largest purchase in your life.How to Choose a Mortgage Broker?Always get the referral from someone who has actually used the broker instead of just randomly selecting a broker.

Another way is to ask your friends and relatives for referrals.Pay close attention to the broker’s services, his communication style, his level of knowledge, and how he approaches the clients.Your real estate agent too can refer a few mortgage brokers to you with whom they have worked and whom they trust.There is also some in-house mortgage broker with few real estate companies as part of their suite of services, but a borrower is not obligated to go with that mortgage broker.Finding the right mortgage broker is similar to choosing the best mortgage lender.The advice is to interview a minimum of three mortgage brokers to know what services they offer, their level of experience, and their way to simplify the process to help you.Your state’s professional licensing authority can guide you to ensure they have mortgage broker’s licenses in good standing.Similarly, go through online reviews and ratings.

Similarly, Better Business Bureau too can be checked to know if the broker you’re considering has a sound reputation.ConclusionMortgage brokers find a bank or a direct lender who is ready to make a specific loan a borrower is seeking.In the mortgage market, Mortgage brokers are the largest sellers for lenders.To assure compliance with banking and finance laws many mortgage brokers are regulated by federal laws, federal enforcement agencies, and state laws or licensing boards.A mortgage broker will make more money per loan than a loan officer.Do your homework well before selecting a mortgage broker any avoid loss of time and money.https://www.compareclosing.com/blog/benefits-of-mortgage-brokers/

What is a No Fee Mortgage?When a lender does not charges any fees for a mortgage application, appraisal, underwriting, processing, private mortgage insurance, and other third-party closing costs then it is termed a no fee mortgage.Understanding no fee mortgageThe interest rate of a no-fee mortgage is already incorporated in the fees bank charges.While charging a slightly higher interest rate over the duration of the loan the lender covers many closing costs and fees upfront.Though it decreases the cash the buyer needs to provide upfront in addition to the down payment it increases the borrower’s monthly payment.No-fee terms vary from lender to lender.

Certain taxes like transfer taxes or attorney fees will not get covered even when a mortgage is marketed as “no fee” by some lenders.

Similarly, flood and private mortgage insurance too are not included.In cases with no-fee mortgages, a borrower is required to hold the loan for a minimum period of time, otherwise, they need to pay an early repayment or cancellation fee to the lender.If the borrower makes payments ahead of schedule then the lender could charge a prepayment penalty.If the loan needs to be closed before a certain date then, the bank would want closing costs to be repaid.

Such policies help to safeguard the bank’s profit.For borrowers, only if you plan to hold the mortgage for a few years then a no-fee mortgage would make financial sense.Even if you as a borrower can save on closing costs in the short term, you will wind up paying thousands of dollars in extra interest over the life of a 30-year mortgage.No fee mortgage exampleFor instance, if a mortgage applicant with a 30-year, fixed-rate term borrows $500,000.Bank A may offer a traditional mortgage of a fixed interest rate of 4.5 % and a closing cost of $3,000.While Bank B may offer a no-fee mortgage at 5 % fixed and zero closing costs.The borrower would pay $2,533 of monthly payment to Bank A.

And $2,684, or $151 more each month to Bank B.After less than two years of payments with Bank B, the borrower would have paid the bank $3,000 which would have covered the closing costs otherwise.After that every month the bank earns an additional $150 because of the higher interest rate.So over 30 years, Bank B would be paid $54,000 more by the borrower than the loan from Bank A.If the mortgage is for a shorter time period then it will decrease the total cost of the loan.The homeowner could refinance at a lower rate if the interest rates fall.

However, if rates rise or property values fall then the option of refinancing is useless.How does a no-fee mortgage refinance work?A no-fee mortgage refinance is essentially a loan transaction in which the lender pays settlement costs like processing, underwriting fees, appraisal fee, loan origination fees, and third-party costs like title or escrow fees.When we assume the lender actually pays your closings costs, it will add to your interest rate, sometimes sizeably, so as to cover up for the missing fees that are typically charged to you at closing.ConclusionWhile no fee mortgage type of offer is not a new concept, or unique, it’s definitely a subject worth knowing to understand what you’re getting when you choose this option.Instead of paying your closing costs, your lender pays it for you.