Hard Money Loan Florida Clearwater Beach
What’s 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 asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary solution (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 someone pick 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 funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, banks quite infrequently fund a loan guaranteed by a property in need of repairs before it can be used; so the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary lending will be provided by an exclusive lender to the borrower to buy the property and lease it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for normal funding consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who have 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 when compared with the loan amount versus the borrower’s credit history. 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 taking a look at a mix of variables 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 involved in asset based lending?
Most hard money lenders in Clearwater Beach charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, financing processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward terms without all the concealed junk fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as 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.
Is there a pre-payment fee with hard money loans?
For example, with a 6 prepayment penalty, 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 so that the lender receives a little return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no prepayment fee 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 a couple of 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 typically require broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing a repair & flip or rehab project, what’ll 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 helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral 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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