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Hard Money Loan Florida Belle Glade
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a temporary alternative (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 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 financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance an individual 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 Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be happy to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). As an example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with conventional financing. 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 funding will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a time period that is particular, 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 heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal funding consistently turn down quality borrowers including physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there is a huge importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 looking at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 associated with asset based lending?
Most hard money lenders in Belle Glade charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, assessment fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed junk fees and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid in the actual loan proceeds.
Will there be a pre-payment penalty with hard money loans?
Usually Belle Glade hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment penalty, 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 return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment penalty 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 evaluation, 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 applying is an assessment needed?
Yes, hard money loans usually need an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing flip or rehab project & a fix, 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 timeline and worksheet. The lender will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus mainly 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 information.
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