Hard Money Loan Florida Boca Raton
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. 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 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 financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund one 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 generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be pleased to give on a property that either lacks cash flow or requires physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan guaranteed by a property in need of repairs; so the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, an exclusive lender will provide short term lending to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a particular period of time. (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. Hence traditional banks for conventional lending consistently turn down quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there’s an enormous requirement for private lenders who look at the value of the underlying asset in comparison to the loan amount 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 normally 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 dependent upon looking at a combination of variables 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?
Hard money lenders in Boca Raton charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, a loan processing fee, appraisal fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden junk fees and charges an incredibly low origination fee of only 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 (other than the application fee) are paid from the actual loan proceeds.
Can there be a prepayment penalty with hard money loans?
Normally Boca Raton hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment 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 in order for the lender receives at least a small yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty will be issued.
How quickly can a hard money loan that is typical 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 evaluation, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal needed,?
Yes, hard money loans generally demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When finishing flip or rehabilitation job & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral rather than the credit score.
If you’re looking for a hard money loan for a rehab, 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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