Hard Money Lender Florida Key West 33041
Hard Money Lender FL Key West
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset 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 typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person pick a hard money loan (asset–based loan) over a traditional loan offered by a bank with lower rates?
There are many reasons why a borrower would choose to use private funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a personal lender will be happy to give on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan secured by a property in need of repairs is quite infrequently funded by banks; so the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with normal financing. 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 temporary lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there is a huge need for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 on taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 involved with asset based lending?
Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from an independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all of the crap fees that are concealed and charges a very low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.
Is there a pre payment penalty with hard money loans?
For instance, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives at least a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre payment penalty will be issued.
How fast can a hard money loan that is typical close?
At Capital Funding Financial, we are 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 appraisal, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation required when implementing?
Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When finishing flip or rehabilitation job & a repair, what will 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 will use this as a guide in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you’re looking for a hard money loan for a rehab, 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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Key West Florida Hard Money Lender