Hard Money Loan Florida Daytona Beach
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 collateralized asset. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short term alternative (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 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 funding or a hard money loan over a more affordable conventional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a private lender will be happy to loan 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, banks quite rarely finance a loan secured by a property in need of repairs before it can be used; so the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short-term financing will be provided by a personal lender to the borrower to buy the property and rent 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 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 lending consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. So, there is an enormous importance of private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 determined by looking at a combination of factors such as: (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 Daytona Beach charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, a loan processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward terms without each of the trash fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes there’s a large enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from your actual loan proceeds.
Can there be a pre payment fee with hard money loans?
For instance, with a 6 pre payment penalty, 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 your lender receives at least a little yield for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower 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’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 appraisal, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an evaluation required?
Yes, hard money loans usually require an assessment, broker price opinion, or comparative sales analysis. We order an unaffiliated appraisal.
When finishing a fix & flip or rehabilitation job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to find the borrowers expertise in managing or performing 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 in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the collateral and not 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 advice.
Just click here Note Investing for more information.
Capital Funding Financial Mortgage Notes:
Article source: http://capitalfundingfinancial.com