Hard Money Loan Florida Clermont
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, 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 choose 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 financing 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 fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires 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 instance, a loan secured by a property in need of repairs is quite infrequently funded by banks; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with conventional lending. 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 a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Thus, there is certainly a huge requirement for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. 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?
Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 involved in asset based lending?
Hard money lenders in Clermont charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without each of the concealed rubbish fees and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge 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.
Can there be a pre-payment penalty with hard money loans?
For instance, 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 condition is put in place so the lender receives at least a modest yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty will be issued.
How fast 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed,?
Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab job, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender will even require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.
If you’re looking for 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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