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Hard Money Loan Florida Avon Park
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years typically) 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 conventional financing: (1) Quick Funding– conventional banks take a 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 finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, a loan guaranteed by a property in need of repairs is really seldom funded by banks; consequently the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender will provide short-term lending to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a time period that is specific, the hard money loan will be refinanced by a commercial lender with normal financing. (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. So even quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Hence, there is a huge need for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we generally 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 Avon Park charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of only 2%* and offers straight forward provisions without each of the rubbish fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan earnings.
Will there be a pre payment penalty with hard money loans?
For example, with a 6 prepayment fee, 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 the lender receives at least a small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, 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.
When employing is an appraisal required?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an assessment. We order an unaffiliated appraisal on the subject property.
When completing flip or rehab job & a fix, what will 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 a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehab; therefore the lender will need to find the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral rather than the credit score.
If you’re 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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Links:
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