Hard Money Loan Florida Bradenton
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 underlying collateralized asset. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short term option (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone choose 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 financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just one family residential loan, any where between 60–90 days to finance 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 Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, banks quite rarely finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower uses a hard money lender payoff the hard money loan with normal lending, and then rehabilitate and to purchase 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, an exclusive lender provides short-term financing to the borrower to buy the property and rent 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 lending. (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. Consequently quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. Therefore, there’s an enormous need for private lenders who look the value of the underlying asset compared to 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 generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 on taking a look at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 involved with asset based lending?
Hard money lenders in Bradenton charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the trash fees that are concealed and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from the actual loan earnings.
Will there be a prepayment fee with hard money loans?
Typically Bradenton hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.
How quickly can a hard money loan that is typical 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 appraisal, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when implementing?
Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When completing a repair & flip or rehabilitation job, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehab; consequently the lender will want to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you’re 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 info.
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