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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 primarily on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short term option (1–3 years usually) 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 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– traditional banks take the absolute minimum of 45 days to finance a single 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 Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to loan on a property that either lacks cash flow or requires physical improvements so long as the borrower has enough “skin in the game” (equity). As an example, banks very infrequently fund a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary financing 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 time frame that is particular, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Consequently, there’s 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. At Capital Funding Financial, we base our funding decision chiefly 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?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix 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” (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?
Most hard money lenders in Gainesville charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden trash fees and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.
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 pre-payment fee, 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 so the lender receives at least a modest return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, 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 assessment, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation required?
Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing a repair & flip or rehab project, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to see the borrowers expertise in managing or performing real estate 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 from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the security rather than 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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Links:
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