Hard Money Lender FL Panama City
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan. Where traditional loans are normally for 15–20 year terms, 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 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For instance, a loan secured by a property in need of repairs is really infrequently funded by banks before it can be used; hence the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender will provide temporary funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time frame that is particular, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers including physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Therefore, there’s 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. We usually look for a 50% – 65% LTV in our loans. What that means is we usually 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 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 file preparation by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all of the concealed rubbish fees and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from the actual loan proceeds.
Is there a pre-payment fee with hard money loans?
For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a little return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, subsequently no prepayment 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see the borrowers experience in performing or managing real estate 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 the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you are in need of a hard money loan for a rehab, 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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Article source: http://capitalfundingfinancial.com
Panama City Florida Hard Money Lender