Hard Money Loan Florida Altamonte Springs
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized 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 mainly 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 short term solution (1–3 years commonly) 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 financing or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be pleased to give on a property that either lacks cash flow or requires physical advancements 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 very seldom funded by banks before it can be used; so the borrower uses a hard money lender settlement the hard money loan with normal financing, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will give you short term funding to the borrower to buy the property and rent it up. Once the property is stabilized for a time period that is specific, the hard money loan will be refinanced by a commercial lender with traditional financing. (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. Consequently traditional banks for normal funding consistently turn down even quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there is an enormous need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a combination of variables for example: (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 associated with asset based lending?
Most hard money lenders in Altamonte Springs charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, assessment fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of only 2%* and offers straight forward conditions without each of the junk fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.
Is there a pre-payment fee with hard money loans?
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 condition is put in place in order for the lender receives a small yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre payment penalty will be issued.
How quickly 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required?
Yes, hard money loans generally require broker price opinion, an assessment, or comparative sales analysis. We order an independent appraisal.
When finishing a repair & flip or rehabilitation project, what will the hard money lender require?
Besides the apparent 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 a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. However, 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 info.
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