Hard Money Loan Florida Fort Pierce
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a short-term alternative (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 cheaper conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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 financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s really 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 requires physical progress so long as the borrower has enough “skin in the game” (equity). For instance, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then settlement 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. Yet, a personal lender will give you temporary funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan 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. So even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for normal funding. So, there’s an enormous requirement for private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 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 place, (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 with asset based lending?
Hard money lenders in Fort Pierce charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, appraisal fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without all the junk fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan earnings.
Is there a pre payment penalty with hard money loans?
Usually Fort Pierce hard money loans have a 3–6 month minimum interest prerequisite. 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 yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no pre payment fee will be issued.
How fast 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 evaluation, 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 using is an evaluation required,?
Yes, hard money loans typically require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a repair & flip or rehab job, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers experience 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 may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you are looking for 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 advice.
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