Hard Money Loan Florida Fort Pierce
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the collateralized asset 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 primarily on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short term solution (1–3 years normally) 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 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally funded 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. Before it can be used for example, banks really seldom finance a loan secured by a property in need of repairs; therefore the borrower uses a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short term lending will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (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. Thus traditional banks for normal funding consistently turn down even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Thus, there’s an enormous importance of private lenders who look more at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 on 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 place, (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 involved with asset based lending?
Most hard money lenders in Fort Pierce 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, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the junk fees that are concealed and charges an extremely low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan earnings.
Can there be a prepayment penalty with hard money loans?
Normally Fort Pierce hard money loans have a 3–6 month minimum interest prerequisite. For example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so your 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, then no prepayment fee 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 appraisal, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required?
Yes, hard money loans usually need an appraisal, broker price opinion, or comparative sales analysis. We order an independent appraisal.
When finishing a fix & flip or rehab job, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want 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 for such listed repairs. The lender may also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security rather than 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 information.
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