Hard Money Loan Florida Fort Walton Beach
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are usually 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 a person choose 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 cheaper conventional financing: (1) Quick Funding– conventional banks take a 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 finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For example, a loan guaranteed by a property in need of repairs is really seldom funded by banks before it can be used; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender will provide short-term financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for conventional funding consistently turn down even quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. So, there is an enormous importance of private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we typically lend out 65% 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 mix 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” (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 Walton Beach charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, an application fee, assessment fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward provisions without all the crap fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan proceeds.
Will there be a pre payment penalty with hard money loans?
Generally Fort Walton Beach hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives a small yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre-payment fee will be issued.
How fast 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 bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an evaluation required,?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a repair & flip or rehabilitation 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 uses this as a guide in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to find the borrowers experience in managing or performing 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 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 largely on the asset value of the collateral and never 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 advice.
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