Hard Money Loan Florida Arcadia
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term alternative (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 conventional loan provided 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 affordable traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to fund 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 Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. As an example, banks very infrequently fund a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender will provide temporary lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus 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. Consequently, there is certainly a huge 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. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend 65% out 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 dependent upon looking at a combination of variables for example: (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 with asset based lending?
Most hard money lenders in Arcadia 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 a lawyer, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all the concealed junk fees and charges a very low origination fee of just 2%*
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 each of the fees (apart from the application fee) are paid from your actual loan proceeds.
Can there be a pre payment fee with hard money loans?
For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives at least a modest yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when employing?
Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an independent appraisal.
When finishing a repair & flip or rehabilitation project, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; so the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security rather than the credit score.
If you are looking for 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 advice.
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