Hard Money Lender FL Jensen Beach
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term 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 home.
Why exactly would a person pick a hard money loan (asset–based loan) over a traditional loan offered 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 traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be happy to give on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks really seldom finance a loan secured by a property in need of repairs; so the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, a commercial lender will refinance the hard money loan with conventional funding. (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. Thus traditional banks for normal lending consistently turn down even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Hence, there is an enormous requirement for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 usually range from 10% all the way up to 15%. The rate by the lender is dependent upon 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” (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 with asset based lending?
Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by an attorney, financing processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the trash fees that are concealed and costs a very low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre-payment fee with hard money loans?
Normally hard money lenders in Jensen Beach Florida implement a 3–6 month minimum interest requirement. 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 condition is put in place so the lender receives a modest return 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’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 deal 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 implementing?
Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an appraisal. We are a Jensen Beach hard money lender who orders an appraisal that is independent on the subject property.
When finishing a repair & flip or rehab job, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will need to find the borrowers expertise in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender will also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral rather than 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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Jensen Beach Florida Hard Money Lender