Hard Money Mortgages: 4 Exit Strategies to Consider

Hard money mortgages can be a great temporary solution for you when other options are not available. A hard money loan will typically only last 1 to 3 years in most cases. Therefore, you will have to come up with some type of exit strategy if you have this type of loan. Here are a few potential exit strategies to consider.

1. Traditional Mortgage

Ultimately, your main goal should be to locate long-term financing for the property if you wish to stay in it. A hard money mortgage is never meant to be a permanent solution, but it can buy you time to find a traditional mortgage that you like. Many people are forced into using a hard money loan because they have no other options. It might happen as a result of having poor credit or a large debt ratio. Both of these factors might contribute to a person being unable to refinance an existing loan.

When you secure a hard money loan, this can give you some time to rebuild your credit or pay down existing debts. With 2 to 3 years, you could potentially do enough good for your credit that you might be able to get approved for a new loan. If your debt ratio was the problem, you can definitely pay off quite a bit of debt in 2 to 3 years. Therefore, even though it might seem difficult to get approved for a traditional mortgage, a hard money loan might provide you with enough time to increase your chances of getting approved.

2. Sell the House

Another good option that you might want to consider is selling the house. You might be ready to unload the house and move on with your life. If this is the case, the hard money loan should provide you with enough time to sell the house at a fair price. This will provide you with enough money to pay off the hard money loan and allow you to start over. The new buyer can come in and take over the house while you are free to move on to a new situation.

3. Subprime Mortgage

If you want to keep the house and you still cannot get approved for a traditional mortgage, you might want to consider getting a subprime mortgage. A subprime mortgage is designed to approve those with less than perfect credit. You will usually have to agree to terms that are not ideal or a high interest rate. However, the terms will typically be more favorable than using a hard money loan. It will also be a more long-term solution for you.

4. Another Hard Money Loan

One of the last options that you have is to refinance with a different hard money loan. This is by far the least attractive solution that you have, but it will help you avoid foreclosure. You may have to find a different hard money lender to work with or negotiate a new loan with your existing lender. Keep in mind that this is another temporary solution.

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