Hard Money Loan Florida Astatula
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily 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 traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary 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 conventional 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– traditional banks take the absolute minimum of 45 days to finance a single 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 commonly funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be pleased to loan on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, banks really rarely fund a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with normal lending. 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 provides temporary lending to the borrower to buy the property and lease it up. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal lending. Hence, there is an enormous importance of private lenders who look the value of the underlying asset compared to the loan amount 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 generally 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 determined by taking a look at a mix 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 Astatula charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward provisions without each of the concealed rubbish 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 each of the fees (besides the application fee) are paid from your actual loan earnings.
Will there be a prepayment fee with hard money loans?
Generally Astatula hard money loans have a 3–6 month minimum interest condition. For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment fee will be issued.
How fast 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 appraisal, 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 employing is an assessment required?
Yes, hard money loans generally need an appraisal, broker price opinion, or comparative sales analysis. We order an unaffiliated appraisal on the subject property.
When finishing flip or rehab project & a repair, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security rather than 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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