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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 chiefly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short term option (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person choose 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 funding or a hard money loan over a cheaper traditional funding: (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 finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks before it can be used; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you temporary financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal funding. Consequently, there is a huge importance of private lenders who look the value of the underlying asset in comparison 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 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 typically range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 associated with asset based lending?
Hard money lenders in Daytona Beach charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by an attorney, an application fee, evaluation fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of only 2%* and offers straight forward provisions without each of the junk fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan earnings.
Is there a prepayment penalty with hard money loans?
Usually Daytona Beach hard money loans have a 3–6 month minimum interest prerequisite. 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 extra months of interest due. This requirement is put in place so that the lender receives at least a modest 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 fast can a hard money loan that is typical 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 deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an assessment needed?
Yes, hard money loans usually require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehabilitation 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 funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to see the borrowers expertise in managing or performing 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 also require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral 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 info.
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