Hard Money Lender FL Anna Maria
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value 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 mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, 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 home.
Why exactly would someone choose a hard money loan (asset–based loan) over a conventional loan offered 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 conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 commonly financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a personal lender will be happy to loan on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). By way of example, banks very rarely finance a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender payoff the hard money loan with normal financing, and then to buy 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. Nevertheless, an exclusive lender provides short-term lending to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a specific time frame. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So traditional banks for normal lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. So, 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. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We typically 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of factors such as: (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 in asset based lending?
Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by a lawyer, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without each of the junk fees that are hidden and charges a very low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid in the actual loan earnings.
Will there be a prepayment fee with hard money loans?
Usually hard money lenders in Anna Maria Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 pre payment 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 that the lender receives a modest yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no pre-payment fee 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 few days when given a complete loan package (credit report, income documentation, independent appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we are a Anna Maria hard money lender who orders an appraisal that is independent on the subject property.
When finishing a fix & flip or rehab job, what will the hard money lender require?
Well besides the obvious 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 helpful tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will need to find the borrowers experience in managing or performing property 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 also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the security and not the credit score.
If you are 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 info.
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Anna Maria Florida Hard Money Lender