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Hard Money Loan Florida Gainesville
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying collateralized asset. 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 mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years commonly) 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 choose a hard money loan (asset–based loan) over a traditional loan provided 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 traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance 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 generally funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, a loan secured by a property in need of repairs is very infrequently funded by banks; so the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then to buy and rehabilitate the property. 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 short term financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with conventional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal financing. So, there’s an enormous importance of private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we normally 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 on looking at a combination of variables for example: (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 associated with asset based lending?
Most hard money lenders in Gainesville charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by a lawyer, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all the hidden crap fees and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes 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 in the actual loan earnings.
Is there a prepayment penalty with hard money loans?
For example, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives at least a small yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no prepayment fee will be issued.
How fast can a hard money loan that is typical 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 price takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an evaluation required,?
Yes, hard money loans generally require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing a fix & flip or rehabilitation project, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws 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 exhibit 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 are 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 info.
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