Hard Money Lender FL Hampton
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 asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a temporary solution (1–3 years normally) 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– conventional banks take a 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 finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, banks very seldom fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then 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, a personal lender will provide temporary lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. Consequently, there’s a huge requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally 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?
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” (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?
Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward provisions without all the hidden trash fees
Can the loan fees be paid from the 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 the actual loan earnings.
Can there be a prepayment penalty with hard money loans?
Typically hard money lenders in Hampton Florida implement a 3–6 month minimum interest prerequisite. For example, 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 small return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty will be issued.
How fast can a typical hard money loan close?
At Capital Funding Financial, we’re 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation required when employing?
Yes, hard money loans typically need broker price opinion, an assessment, 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’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you’re 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 information.
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Hampton Florida Hard Money Lender