Hard Money Loan Florida Bryant
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 asset that is collateralized that is underlying. Traditional banks and lenders focus mainly 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 collateral for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
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– conventional 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 finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy 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). As an example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; hence the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with conventional 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 provide temporary funding to the borrower to purchase the property and lease it up. 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 financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal funding consistently turn down even quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is an enormous requirement for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 Bryant charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward conditions without each of the trash fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge 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.
Can there be a pre-payment penalty with hard money loans?
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 additional months of interest due. This requirement is put in place in order for the lender receives at least 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 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 evaluation, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an appraisal needed,?
Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehab 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 a guide in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the security and never the credit score.
If you are 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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