Hard Money Loan Florida Deerfield Beach
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on income and the credit 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 traditional loans are usually for 15–20 year periods, hard money loans are used as a temporary solution (1–3 years typically) 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 pick a hard money loan (asset–based loan) over a conventional 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 more economical conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just one 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 funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be pleased to loan on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan secured by a property in need of repairs is quite seldom funded by banks; hence the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, an exclusive lender will give you temporary financing to the borrower to buy the property and rent it up. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with traditional 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 traditional banks for normal financing consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there is an enormous need for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan 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 usually lend out 65% 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 variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 Deerfield Beach charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, a loan processing fee, appraisal fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the junk fees that are hidden and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid in the actual loan proceeds.
Is there a pre payment fee with hard money loans?
For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no pre payment penalty 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 evaluation, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment required when using?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an appraisal. We order an independent appraisal.
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 need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers expertise in performing or managing real estate 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 a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security 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 info.
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