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Hard Money Loan Florida Panama City
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus primarily 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 conventional loans are generally for 15–20 year durations, hard money loans are used as a short-term alternative (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person choose a hard money loan (asset–based loan) over a conventional 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 more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual 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 generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be happy to lend on a property that either lacks cash flow or requires 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 infrequently funded by banks; so the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides short-term funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a certain period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for normal lending consistently turn down quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Hence, there’s an enormous requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We generally 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 generally 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 state and location, (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 associated with asset based lending?
Most hard money lenders in Panama City charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by a lawyer, financing processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the concealed trash fees and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan proceeds.
Can there be a prepayment penalty with hard money loans?
Usually Panama City hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives at least a modest yield for the time, hassle and apportionment 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 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 days when given a complete loan package (credit report, income documentation, independent appraisal, title commitment). The typical price takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an assessment required,?
Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what will 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 will use this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers experience in managing or performing 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 that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security rather than the credit score.
If you’re in need of 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 info.
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