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Hard Money Loan Florida Altamonte Springs
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth 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 primarily on the worth of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a temporary solution (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 more economical conventional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance just 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 typically funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks quite seldom finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender settlement the hard money loan with normal lending, 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. Nevertheless, a private lender provides short-term financing to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional lending once the property is stabilized for a specific time frame. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Therefore, there’s 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 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a mix of factors 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?
Hard money lenders in Altamonte Springs charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, an application fee, appraisal fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward provisions without all the concealed crap fees
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 (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
For instance, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra 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 some borrower. If the borrower repays the loan after half a year, subsequently no prepayment penalty will be issued.
How quickly 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an appraisal required?
Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When completing a repair & flip or rehabilitation project, 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 worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require income statement and a credit report from the borrower showing that 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 information.
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