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Hard Money Loan Florida Florahome
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short term alternative (1–3 years commonly) 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 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 affordable conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just one 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 funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks very seldom finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary funding will be provided by an exclusive lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a specific time period. (3) Not based exclusively 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 quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there’s a huge importance of private lenders who look 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 mainly on the LTV (loan to value). We normally 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 variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 in asset based lending?
Most hard money lenders in Florahome charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the hidden crap fees and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.
Is there a prepayment penalty with hard money loans?
For 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 return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no pre payment penalty will be issued.
How fast can a hard money loan that is typical 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 appraisal, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal required when using?
Yes, hard money loans usually need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing flip or rehabilitation project & a repair, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security and not 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 information.
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