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The Consumer Financial Protection Bureau says: “Amortization means paying off a loan with regular payments, so that the amount you owe goes down with each payment. Negative amortization means that even when you pay, the amount you owe will still go up because you are not paying enough to cover the interest.”

How It Happens

Some borrowers experience negative amortization with an adjustable-rate mortgage (ARM). An ARM is a home loan with an interest rate that fluctuates based on consumer indexes. In order to protect borrowers from steep increases, some ARMs include a cap on your monthly payment. However, if rates rise enough, that maximum payment may not be enough to cover your monthly interest. When that happens, the unpaid interest is added to your principal, effectively increasing your loan balance rather than paying it down. This can lead to more issues for a borrower. If the housing market in your area experiences a downturn and your home value declines while your loan principal continues to increase, you may find yourself with an upside-down mortgage and that means you owe more money than the worth of your home.

Avoiding Negative Amortization

The first step to avoiding negative amortization is to confirm with your mortgage provider the type of mortgage that you currently have to determine your risk of having to deal with this scenario. The simplest way to prevent negative amortization is by always ensuring your monthly payments cover the interest accrued. This could mean paying more than your minimum monthly payment. Another option is to refinance with a fixed-rate mortgage.

Source: https://openmortgage.com/negative-amortization-what-it-is-and-how-to-avoid-it

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender!  We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

With COVID-19 so much in the news in Arizona, we thought we would share this news article regarding COVID-19 and hard money loans. The entire piece can be found here.

During these trying times with COVID-19, Hard Money Lenders Arizona is working tirelessly to ensure accessibility and services to their Arizona base of clientele. In an effort to provide more offerings and assistance, they are expanding their loan programs to include commercial hard money loans to residents of Arizona as they may be running into funding challenges in the short term. A commercial hard money loan is dependent on the real estate assets the borrower has. Commercial hard money loans are also called “bridge loans”, “no-doc loans” or “private hard money loans” just to name a few. Loans from traditional lenders decide if a borrower is qualified based on their credit, financial statements, etc., while a commercial hard money loan is strictly based on assets the borrower has. This allows borrowers whose projects don’t necessarily meet the traditional guidelines of most banks and other lenders to receive funding from other reliable private lenders.

Potential to receive hard money lending in Arizona falls back on certain criteria including but not limited to credit history, insurability and/or ability to provide property collateral. The company has been built on the foundation and mindset that just because an individual may have a poor credit score does not mean that they should be incapable of receiving lending or financing for any and all real estate or business purposes. All specialists employed with Barrett Financial Group are proficient in carrying this mentality out, in fast and efficient ways and provide customers with a plethora of knowledge on the above-mentioned loan programs.

Hard Money Lenders loan programs are designed for Arizona real estate investment professionals and to help make the process of investment funding fast and easy. Their simple loan process enables clients to close purchases in as little as 3 business days. They work with investors buying REOs, short sales, real estate auctions, trustee sales, trustee sale refinances, private party, and even residential construction projects. Their programs focus on single-family residential properties (1-4 unit) all throughout the state of Arizona and California.

Hard Money Lenders in Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender!  We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.

Fix and flip loans—also known as a bridge loan, swing loan, or gap financing—are short-term loans that offer you with the working capital required to meet the quick financial undertakings of your fix and flip venture. These types of loans are usually for a twelve-month term or less and can be acquired in a couple of days. Like a lot of other kinds of property loans, backing is needed for an underwriter to back the loan. So, what’s interesting about bridge loans—and what makes it such a good alternative for those who are new to fix and flips—is that the backing may be the projected value of the flipped property. This may be structured in two distinctive ways: the amount based on how much you could borrow on the after repair value (ARV) or based on the loan to cost (LTC) ratio.

After Repair Value (ARV) Loans

ARV fix and flip loans are appropriate for properties that will increase considerably in value following the renovations as much as 50 to 100% on top of the purchased price. A lot of lenders cap ARV loans at between 65 and 70% of the property’s estimated ARV.

Let’s say the purchase price of the property is $100,000, and the renovation cost will be $50,000. The entire investment that will make this home available to market is $150,000. You have done your homework, and you’ve estimated you could sell the property for $200,000.

The lender will do their own research to decide if your investment estimations are accurate and your selling price is reasonable. Because their findings support your data, they agree to give you a loan that’s 65% of the ARV, equaling $130,000. Meaning you only need to put up $20,000, or in this instance, 10% of the ARV, on your own. If the property sells for $200,000, you have made a $50,000 profit.

Loan to Cost (LTC) Ratio Loans

Loan to cost ratio loans are suitable for properties that, while still anticipated to make a profit when they sell, are not estimated to sell at 50 to 100% profit margin. Dependent on the market, the lender might be ready to underwrite an investment and a rehabilitation LTC loan of 75 to 80%.

For instance, you have located a property that costs $125,000 and will require $45,000 to renovate. Your research shows you will be able to sell the property for $210,000 after the repairs. The lender offers you a loan of $127,500, meaning you’ll have to put up the rest of the $42,500 on your own. When you sell the renovated property for your asking price of $210,000, you’ll end up with a profit of $42,500.

Bridge Loan Rates

Depending on the kind of lender, no matter if it is hard money, private money, or a financial institution, rates may range considerably. The loans terms will also differ, so it is vital that investors look around until finding a lender that is appropriate for their individual requirements.

In the end, the kind of bridge loan you decide on becomes a matter of balance—meeting your fix and flip property’s requirements without exceeding your personal financial risk.

Financing For Fix and Flips

Brad Loans provides competitive financing alternatives for real estate investors interested in fix and flip projects. Get no interest on unused renovation funds, 100% financing on rehabilitation costs, and closings in in around 10 business days when applying for a Brand Loans Fix and Flip Loan.

Hard Money Lenders in Phoenix, AZ

When you are searching for hard money loans near me in Phoenix, Scottsdale, Glendale, Tempe, Mesa, Chandler, or Gilbert, Arizona; Brad Loans is Arizona’s most trusted direct hard money lender!  We specialize in hard money loans for Fix and Flip, refinancing mortgages with bad credit, business loans secured by real estate, real estate purchases, short sales, and other endeavors with quick turnaround in the Phoenix Valley.

BradLoans.com is the most trusted direct hard money lender and private money lender in Arizona! We are the best hard money lender in Arizona with the ability to fund commercial & residential hard money loans many times within a couple of days or less. Our lending rates and fees are reasonable compared to other Arizona hard money brokers or mortgage brokers in Arizona.