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 mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short term 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 home.
Why exactly would a person 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, a loan secured by a property in need of repairs is quite infrequently funded by banks; therefore the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term funding will be provided by a personal lender to the borrower to buy the property and rent it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal lending consistently turn down quality borrowers such as for instance doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Therefore, there is certainly an enormous need for private lenders who look 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 funding decision primarily on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we generally lend out 65% of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is determined by 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 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, an application fee, assessment fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all the junk fees that are hidden and costs a very low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from the actual loan proceeds.
Will there be a pre payment penalty with hard money loans?
For example, 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 at least a modest yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment fee will be issued.
How fast can a hard money loan that is typical 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an appraisal needed?
Yes, hard money loans typically need 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 rehab job & a repair, what will the hard money lender require?
Well besides the obvious 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 purposes. 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 listed repairs. The lender will also require a credit report and income statement from 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 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 advice.
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