Hard Money Loan Florida Fort Lauderdale
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value 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 primarily on the value of the asset being used as security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a temporary alternative (1–3 years typically) 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 cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance an individual 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 financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be happy to lend on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks really seldom fund a loan secured by a property in need of repairs; so the borrower uses a hard money lender payoff the hard money loan with traditional lending, 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. Yet, temporary financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional lending consistently turn down even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Consequently, there is a huge need for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend 65% out 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 determined by taking a look at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 Fort Lauderdale charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward provisions without all of the junk fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from your actual loan earnings.
Is there a pre-payment penalty with hard money loans?
For instance, 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 so the lender receives a modest yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment 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 assessment, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an appraisal needed,?
Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing a fix & flip or rehab project, 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 intended when performing a rehabilitation; thus the lender will need to see the borrowers expertise in performing or managing real estate 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 will even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you’re in need of 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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