Hard Money Loan Florida Cross City
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term solution (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 someone choose 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to finance 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 Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to give on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; hence the borrower uses a hard money lender rehabilitate and to purchase the property, and then 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, a private lender will give you short-term funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal funding. Therefore, there is certainly an enormous requirement for private lenders who look the value of the underlying asset when compared with 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 ordinarily 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 taking a look at a mix 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” (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 involved with asset based lending?
Most hard money lenders in Cross City charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, evaluation fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the concealed junk fees and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.
Is there a prepayment fee with hard money loans?
For instance, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives at least a modest return 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 pre-payment 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 appraisal, title commitment). The typical deal takes about one to two weeks to fund 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 require an assessment, broker price opinion, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When finishing flip or rehabilitation project & a repair, what’ll 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 uses this as helpful information in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security rather than the credit score.
If you’re in need of 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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