Hard Money Lender FL Lake Butler
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a short-term alternative (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 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 more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just 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 commonly funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, banks very infrequently finance a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender provides short-term lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional financing. Consequently, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 loan amount. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward provisions without each of the concealed rubbish 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.
Is there a pre payment fee with hard money loans?
For example, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment fee 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 assessment, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an assessment required?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; thus the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security rather than the credit score.
If you are 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 information.
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Lake Butler Florida Hard Money Lender