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Hard Money Loan Florida Alturas
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily 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 security for the loan. 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 dwelling.
Why exactly would someone choose 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 funding 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 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– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be happy to loan on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan secured by a property in need of repairs is really seldom funded by banks; consequently the borrower will use 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. However, an exclusive lender provides temporary financing 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 lending once the property is stabilized for a specific time period. (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. Hence even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. So, there is a huge requirement for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we normally 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 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 in asset based lending?
Most hard money lenders in Alturas charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden trash fees and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan proceeds.
Can there be a pre payment fee with hard money loans?
Generally Alturas hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre payment fee, 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 the lender receives a small return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation needed,?
Yes, hard money loans typically require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing a fix & flip or rehab 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 helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you’re 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 info.
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