Hard Money Lender FL Miami
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan. Where conventional loans are normally for 15–20 year terms, 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 dwelling.
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 conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund an individual 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 typically funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be pleased to lend 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 as an example, a loan secured by a property in need of repairs is very rarely funded by banks; therefore the borrower will use a hard money lender payoff the hard money loan with normal financing, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary funding will be provided by an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based exclusively 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 funding consistently turn down quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Consequently, there is certainly a huge importance of private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 determined by looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden rubbish fees and costs a very low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan earnings.
Can there be a pre payment fee with hard money loans?
By way of 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 return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, then 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 few days when given a complete loan package (credit report, income documentation, independent appraisal, title commitment). The typical deal takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an evaluation required,?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an assessment. We order an independent appraisal on the subject property.
When completing a fix & flip or rehab project, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and not 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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Miami Florida Hard Money Lender