Hard Money Loan Florida Boca Raton
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying collateralized asset. 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 value of the asset used as security for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a short term solution (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 a person pick a hard money loan (asset–based loan) over a traditional 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 funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just 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 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. However, an exclusive lender will be happy to loan on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; so the borrower uses a hard money lender settlement the hard money loan with traditional lending, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short term financing will be provided by a personal lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a time frame that is particular, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal lending consistently turn down even quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Consequently, there’s a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We typically 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of variables such as: (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 involved in asset based lending?
Most hard money lenders in Boca Raton charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, appraisal fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without each of the trash fees that are hidden and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s 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 the actual loan earnings.
Can there be a prepayment fee with hard money loans?
Ordinarily Boca Raton hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives a small 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, then no prepayment penalty will be issued.
How fast 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 deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when implementing?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing flip or rehabilitation job & a repair, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to see the borrowers expertise 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 will also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus mostly 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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