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Hard Money Loan Florida Kissimmee
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short-term option (1–3 years usually) 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 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund an individual 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 financed 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. Nonetheless, an exclusive lender will be pleased to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan guaranteed by a property in need of repairs is very rarely funded by banks; so the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff 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 lending to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional financing consistently turn down even quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Consequently, there’s a huge importance of private lenders who look at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 in Kissimmee charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward terms without each of the junk fees that are concealed
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 all of the fees (besides the application fee) are paid from the actual loan proceeds.
Is there a prepayment penalty with hard money loans?
Ordinarily Kissimmee hard money loans have a 3–6 month minimum interest requirement. For instance, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives a small return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment penalty will be issued.
How quickly 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal required?
Yes, hard money loans generally need broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When completing flip or rehab project & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers experience 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 will even require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security and not 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 information.
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