Hard Money Loan Florida Fort Lauderdale
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value 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 conventional loans are usually for 15–20 year terms, hard money loans are used as a temporary 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 pick a hard money loan (asset–based loan) over a traditional loan offered 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 conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance a single 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 typically funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be happy to give on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, banks very rarely finance a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary financing will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal funding consistently turn down quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Thus, there’s an enormous importance of private lenders who look more at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% 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 mix 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 associated with asset based lending?
Hard money lenders in Fort Lauderdale charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, a loan processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the concealed junk fees and costs a very low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s 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 your actual loan earnings.
Can there be a prepayment penalty 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 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 fee will be issued.
How quickly 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 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 needed when applying?
Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When completing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to find the borrowers expertise 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. The lender may also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.
If you are 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 information.
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