Hard Money Loan Florida Candler
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the underlying collateralized asset. 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 used as security for the loan. Where conventional loans are normally 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 dwelling.
Why exactly would a person choose a hard money loan (asset–based loan) over a conventional loan provided 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 affordable conventional financing: (1) Quick Funding– traditional banks take a 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 generally funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, a loan guaranteed by a property in need of repairs is very rarely funded by banks; therefore the borrower uses a hard money lender payoff the hard money loan with traditional funding, 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. Nonetheless, a private lender will provide short-term lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time period that is specific, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional funding consistently turn down quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Thus, there’s a huge importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 usually range from 10% all the way up to 15%. 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 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 associated with asset based lending?
Hard money lenders in Candler charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, evaluation fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward provisions without all of the trash fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan earnings.
Will there be a prepayment fee with hard money loans?
For instance, with a 6 prepayment penalty, 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 in order for the lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower 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 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 deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an assessment required,?
Yes, hard money loans typically demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing a fix & flip or rehab job, what’ll 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 will use this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to see the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will even require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security rather than 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 info.
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