If you miss payments on your hard money mortgage, you will be charged late fees.
If you continually miss payments, your property will be foreclosed upon. The process varies between states. But, here’s how it looks in California:
Within three months, you will be notified of your property’s sale. If you do not bring the loan current, your home will be sold on the courthouse steps in twenty-one days.
Anyone can bid on the property, as long as they offer what the lender is owed. Many times the investor / lender ends up purchasing the property.
The lender is given what he is owed from the proceeds. The borrower is given any money that is left. If your property is purchased for the minimum price (what the lender is owed), you get nothing.
Since hard money borrowers have their own money invested in the property (at least 35%), they usually try to keep their loans current or sell the property themselves.
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