Hard Money Lender Florida Jay 32565
Hard Money Lender FL Jay
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term option (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone choose a hard money loan (asset–based loan) over a traditional loan provided by a bank with lower rates?
There are many reasons why a borrower would choose to use private financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance a single family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks very rarely fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will give you short term financing to the borrower to buy the property and rent it up. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Therefore, there is certainly an enormous requirement for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally lend out 65% of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (4) borrower’s “skin in the game” (amount of cash equity in the property). At Capital Funding Financial we offer the lowest rates around starting at 8.9%*
What are the fees associated with asset based lending?
Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, financing processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the trash fees that are concealed and costs an extremely low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan proceeds.
Is there a prepayment fee with hard money loans?
For instance, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives a modest yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee will be issued.
How fast can a hard money loan that is typical close?
At Capital Funding Financial, we’re a direct lender and have the ability to close loans within a few days when given a complete loan package (credit report, income documentation, independent evaluation, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an independent appraisal on the subject property.
When completing a repair & flip or rehab job, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; hence the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral rather than the credit score.
If you’re looking for a hard money loan for a rehabilitation, fix & flip, or investment purpose, contact us today at 954-320-0242 or toll free at 1–866–695–0092 or visit Hard Money Loan for more advice.
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Jay Florida Hard Money Lender