Hard Money Loan Florida Fort Lauderdale
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (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 a person pick 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 affordable conventional financing: (1) Quick Funding– conventional banks take a 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 funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, banks quite infrequently finance a loan secured by a property in need of repairs; therefore the borrower will use a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you short term funding to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with traditional lending. (3) Not based solely 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 have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional funding. Thus, there is certainly a huge requirement for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we normally 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 typically 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 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 associated with asset based lending?
Most hard money lenders in Fort Lauderdale charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the junk fees that are hidden and charges a very low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from the actual loan proceeds.
Can there be a pre payment fee with hard money loans?
For instance, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives at least a little return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no prepayment penalty will be issued.
How quickly can a typical hard money loan 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 deal takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an assessment. We order an appraisal that is independent on the subject property.
When completing a repair & flip or rehab job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers experience in managing or performing property 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 a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly 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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