Hard Money Loan Florida Boynton Beach
What is 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. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (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 someone 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 financing or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund one 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 Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan secured by a property in need of repairs is very rarely funded by banks before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with normal lending. 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 lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a specific time frame. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Therefore, there is a huge 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 funding decision mainly on the LTV (loan to value). We typically 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 upon looking at a mix 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” (sum 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 with asset based lending?
Hard money lenders in Boynton Beach charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, a loan processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the rubbish fees that are hidden and costs a very low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge 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 pre-payment fee with hard money loans?
For instance, with a 6 pre-payment fee, 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 in order for the lender receives at least a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment fee 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 bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation required,?
Yes, hard money loans typically need an assessment, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing a fix & flip or rehabilitation job, what’ll 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 worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender may also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security and not the credit score.
If you’re 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 info.
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