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Hard Money Loan Florida Sarasota
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value 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 primarily on the worth of the asset being used as security for the loan. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a short-term solution (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 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, a loan secured by a property in need of repairs is very rarely funded by banks; hence the borrower uses a hard money lender settlement the hard money loan with normal funding, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender provides short-term lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with conventional financing. (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. Thus traditional banks for normal funding consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of variables 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” (sum 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 in Sarasota charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, an application fee, assessment fee from an independent appraiser, and a loan processing fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward provisions without all the crap fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s 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 your actual loan earnings.
Can there be a prepayment fee with hard money loans?
Ordinarily Sarasota hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives at least a small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.
How quickly can a typical hard money loan 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when employing?
Yes, hard money loans generally demand an assessment, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will need to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you are 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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