Hard Money Lender FL Sarasota
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term option (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone choose a hard money loan (asset–based loan) over a conventional loan provided 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 affordable conventional financing: (1) Quick Funding– conventional 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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be pleased to lend on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). For instance, banks really rarely fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with conventional funding, 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. Nevertheless, short term 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 time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional 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. Thus even quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional funding. So, there’s a huge need for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we typically 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 dependent on taking a look at a combination of factors such as: (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. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the crap fees that are concealed and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid in the actual loan earnings.
Will there be a pre-payment penalty with hard money loans?
Ordinarily hard money lenders in Sarasota Florida implement a 3–6 month minimum interest condition. By way of example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives a modest return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment 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 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 implementing is an appraisal needed?
Yes, hard money loans generally demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing flip or rehabilitation job & a fix, 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 worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find 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 even require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you’re looking for 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 advice.
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Sarasota Florida Hard Money Lender