Hard Money Loan Florida Bradenton
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short term option (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 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 funding or a hard money loan over a more affordable conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance a single 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 Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, banks quite infrequently finance a loan secured by a property in need of repairs; consequently the borrower will use a hard money lender to purchase and rehabilitate 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. Nonetheless, a private lender will give you temporary lending to the borrower to buy the property and lease it up. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with traditional lending. (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. So quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Therefore, there is an enormous importance of private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We typically 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 dependent upon taking a look at a combination of variables 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” (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 in asset based lending?
Most 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 document preparation 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 concealed crap fees and charges a very low origination fee of only 2%*
Can the loan fees be paid from the 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.
Can there be a prepayment penalty with hard money loans?
For 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 condition is put in place so the lender receives a little 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, subsequently no pre-payment penalty 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 evaluation, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an evaluation needed,?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. We order an appraisal that is independent on the subject property.
When completing flip or rehabilitation project & a fix, what’ll 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 worksheet and timeline. The lender will use this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; therefore the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.
If you’re in need of 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 information.
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