Hard Money Lender FL Sun City Center
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a temporary 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 conventional loan provided 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 traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, banks quite rarely fund a loan guaranteed by a property in need of repairs; hence the borrower uses a hard money lender to buy and rehabilitate the property, and then 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. Nonetheless, short term financing will be provided by a personal lender to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a particular time period. (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 traditional banks for conventional financing consistently turn down quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. So, there’s an enormous need for private lenders who look the value of the underlying asset in comparison to 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 generally 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?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is determined by taking a look 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?
Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward provisions without all the crap fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid in the actual loan earnings.
Is there a prepayment penalty with hard money loans?
Typically hard money lenders in Sun City Center Florida implement a 3–6 month minimum interest condition. By way of example, with a 6 pre payment penalty, 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 your lender receives at least a little yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, then no pre-payment fee will be issued.
How quickly can a hard money loan that is typical close?
At Capital Funding Financial, we are 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 price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an appraisal needed,?
Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehab job & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehab; consequently the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. 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. Yet, hard money lenders focus largely 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 advice.
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Sun City Center Florida Hard Money Lender