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 primarily on the value of the underlying asset that is collateralized. 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 value of the asset being used as collateral for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term alternative (1–3 years typically) 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 pick a hard money loan (asset–based loan) over a conventional 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 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 finance 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 Demands Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be happy to loan on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks quite seldom fund a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with normal lending. 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 provides short-term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender 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 even quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. So, there is certainly an enormous need for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. 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?
Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Most hard money lenders in Gainesville charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, evaluation fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden crap fees and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the 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 from the actual loan earnings.
Is there a pre-payment fee with hard money loans?
Typically Gainesville hard money loans have a 3–6 month minimum interest requirement. By way of example, 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 in order for the lender receives a small return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment penalty will be issued.
How quickly 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 assessment, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed,?
Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing a repair & flip or rehab project, what’ll the hard money lender require?
Besides the apparent 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 helpful information in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security and not 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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