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Hard Money Loan Florida Delray Beach
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. 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 worth of the asset used as security for the loan. Where traditional loans are generally for 15–20 year durations, 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 home.
Why exactly would someone 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 economical traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be pleased to lend on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan guaranteed by a property in need of repairs is very rarely funded by banks; so the borrower uses a hard money lender payoff the hard money loan with normal financing, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender will provide short term funding to the borrower to buy the property and lease it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Therefore, there’s a huge need for private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We typically 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 involved with asset based lending?
Most hard money lenders in Delray Beach charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all of the crap fees that are hidden and costs a very low origination fee of only 2%*
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 (apart from the application fee) are paid from your actual loan earnings.
Will there be a pre-payment penalty with hard money loans?
For example, with a 6 prepayment 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 so your lender receives a small return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment penalty 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation required?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehabilitation job & a repair, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.
If you are 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 advice.
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