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Hard Money Loan Florida Day
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a temporary 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 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance an individual 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 funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks quite infrequently finance a loan secured by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional funding. 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 will give you temporary financing to the borrower to buy the property and lease it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Thus, there is certainly a huge need for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We typically 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 looking at a combination of factors 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” (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?
Most hard money lenders in Day charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward conditions without each of the concealed rubbish fees
Can the loan fees be paid from the loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.
Will there be a prepayment penalty with hard money loans?
By way of example, with a 6 pre payment 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 so the lender receives at least a little return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment 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 evaluation, title commitment). The typical bargain 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 evaluation needed?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. We order an unaffiliated appraisal on the subject property.
When completing a repair & flip or rehab job, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the security and never the credit score.
If you are in need of 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 information.
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