How are hard money loans amortized?
When a hard money loan is amortized, the borrower makes periodic payments to the lender that consist of both principal and interest. The principal is the amount of the loan that is being repaid, while the interest is the cost of borrowing the money.
The amortization schedule outlines the payment schedule for the loan, including the amount of each payment, the due date, and the amount of principal and interest that is being repaid with each payment.
There are a few different ways that hard money loans can be amortized:
Fixed-rate amortization: With this type of amortization, the interest rate is fixed for the entire loan term. The borrower makes the same payment every month, and the amount of principal and interest that is repaid changes with each payment.
Adjustable-rate amortization: With this type of amortization, the interest rate may change over time. The borrower's payments may increase or decrease depending on the interest rate at any given time.
Interest-only amortization: With this type of amortization, the borrower only pays the interest on the loan for a certain period of time. After that period, the borrower begins to make payments that include both principal and interest.
It's important to carefully consider the terms of a hard money loan, including the amortization schedule, before agreeing to borrow the money. Hard money loans can be more expensive than traditional financing options, so it's important to understand the terms and make sure you can afford the payments.