Hard Money Lender FL Tallahassee
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth 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 value of the asset used as collateral for the loan. Where traditional loans are normally for 15–20 year periods, 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 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 more economical traditional financing: (1) Quick Funding– conventional banks take a 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 fund 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 really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to lend on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). As an example, a loan secured by a property in need of repairs is very infrequently funded by banks before it can be used; so the borrower uses a hard money lender settlement the hard money loan with normal funding, and then rehabilitate and to purchase 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, temporary financing will be provided by a private lender to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a particular period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers such as doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Therefore, there’s a huge importance of private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). 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?
The rate by the lender is determined by taking a look at a mix of variables 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” (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 associated with asset based lending?
Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, an application fee, assessment fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward conditions without all of the hidden crap fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid in the actual loan earnings.
Can there be a pre payment fee with hard money loans?
Usually hard money lenders in Tallahassee Florida implement a 3–6 month minimum interest prerequisite. For instance, with a 6 prepayment penalty, 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 small return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan 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 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 appraisal, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation required?
Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When completing flip or rehabilitation job & a repair, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will even require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly 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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Tallahassee Florida Hard Money Lender