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Hard Money Loan Florida Bartow
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short-term 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 home.
Why exactly would a person pick 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 cheaper traditional financing: (1) Quick Funding– conventional 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 typically funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, a loan secured by a property in need of repairs is really rarely funded by banks; so the borrower will use a hard money lender settlement the hard money loan with traditional 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. Yet, short-term financing will be provided by a personal lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain time period, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So even quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. So, there is an enormous importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We usually 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 on looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 involved in asset based lending?
Most hard money lenders in Bartow charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by a lawyer, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward terms without each of the concealed junk fees
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 each of the fees (apart from the application fee) are paid from your actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives at least a little 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 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 bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an appraisal needed,?
Yes, hard money loans generally require broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
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 want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; consequently the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral and not 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 information.
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