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Hard Money Loan Florida Bryceville
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the asset that is collateralized that is underlying. 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 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 alternative (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 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 funding or a hard money loan over a more affordable traditional funding: (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 finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, banks very infrequently finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender payoff the hard money loan with normal 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. Yet, temporary lending will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with traditional financing. (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. Thus traditional banks for normal funding consistently turn down even quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Hence, there is certainly an enormous need for private lenders who look at 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 capital decision mostly 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 determined by looking at a combination of factors such as: (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 associated with asset based lending?
Most hard money lenders in Bryceville charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, assessment fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward terms without all the trash fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan earnings.
Will there be a prepayment penalty with hard money loans?
For example, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment penalty will be issued.
How quickly 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 one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation required when using?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. We order an independent appraisal.
When completing a fix & flip or rehabilitation project, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and not 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 advice.
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Links:
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