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Hard Money Loan Florida Fellsmere
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value 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 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 someone choose 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 financing or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, banks really infrequently fund a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then to buy 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. Nonetheless, an exclusive lender will give you temporary financing to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a specific time period. (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. So even quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. Thus, there is a huge requirement for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 variables 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 associated with asset based lending?
Hard money lenders in Fellsmere charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without each of the rubbish fees that are hidden and costs an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre payment fee with hard money loans?
For example, with a 6 pre-payment fee, 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 at least a little 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 penalty will be issued.
How quickly 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 assessment, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an assessment required,?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a fix & flip or rehab job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence 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 to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the collateral 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 advice.
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