Hard Money Loan Florida Clearwater
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary option (1–3 years normally) 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 pick 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 cheaper conventional 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 generally financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, banks really rarely finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender provides short term funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a specific time frame. (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 normal funding consistently turn down quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Therefore, there is certainly an enormous need for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We usually 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?
The rate by the lender is dependent upon looking at a combination of variables 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” (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 associated with asset based lending?
Most hard money lenders in Clearwater charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the concealed trash fees and costs an extremely low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from your actual loan earnings.
Is there a pre-payment fee with hard money loans?
Ordinarily Clearwater hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so your lender receives a modest return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment penalty will be issued.
How quickly 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 appraisal, title commitment). The typical bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an assessment required?
Yes, hard money loans usually need an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When completing flip or rehabilitation job & a fix, what’ll the hard money lender require?
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 uses this as helpful information in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the collateral and not 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 advice.
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