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Hard Money Loan Florida Brandon
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are usually 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 choose a hard money loan (asset–based loan) over a traditional 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 more economical traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just 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 commonly funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is very rarely funded by banks; so the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term lending will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with conventional financing. (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 traditional banks for conventional lending consistently turn down even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Therefore, there’s an enormous need for private lenders who look 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 chiefly 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 taking a look at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 Brandon charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all of the junk fees that are hidden 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 big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.
Is there a pre payment penalty with hard money loans?
Generally Brandon hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre payment penalty, 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 so your lender receives a small return 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 pre-payment 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an assessment required,?
Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender require an inspection 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. However, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you are 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 information.
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Links:
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