Hard money mortgages can be the easiest way for people with poor credit to get a home. But, there are also many drawbacks.

Here are some of the cons of hard money mortgages:

- Extremely high interest rates. Hard money mortgage rates can be 12% or higher, giving you a hefty monthly payment.

- Shorter terms. Most hard money mortgages have a term of fifteen years or less. Because of the high interest rates, you probably won’t want to keep the loan for that long.

- Difficult to find. Your local bank can’t help you when it comes to hard money loans. You’ll need to find a hard money mortgage broker or wholesaler experienced in private lending.

- Large down payments. You can’t take out a hard money mortgage without investing in the property yourself. Almost all hard money mortgages require a down payment of 35% or more.

- Pricey upfront costs. It’s not uncommon for hard money lenders to charge five or more points at closing. That means you’ll have to pay 5% of your loan’s value just to take out the mortgage.

- Prepayment penalties. Many hard money mortgages have prepayment penalties that fine you for paying off the loan early by refinancing, selling the home, or just making additional payments.

As you can see, there are many drawbacks to taking out a hard money mortgage. However, these loans also offer some benefits that can’t be found through traditional bank loans. Pros of Hard Money Mortgages can help you consider the other side.