Hard Money Loan Florida Delray 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 underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years usually) 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 financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund 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 typically 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. Before it can be used as an example, banks quite infrequently fund a loan secured by a property in need of repairs; hence the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff 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, short-term financing will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain 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, previous income, and ability to repay the debt. Consequently traditional banks for conventional funding consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt. So, 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 funding decision mostly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent upon looking at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 Delray Beach charge financing origination fee of 3% to 5% of the amount of the loan. 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 an extremely low origination fee of only 2%* and offers straight forward conditions without all of the crap fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from the actual loan earnings.
Will there be a pre payment fee with hard money loans?
Usually Delray 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 should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives at least a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, 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 evaluation, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when employing?
Yes, hard money loans typically need an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehab project & a fix, what will 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 worksheet and timeline. The lender uses this as helpful information in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehab; consequently the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security and never the credit score.
If you are 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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