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 mainly on the value of the asset that is collateralized that is underlying. 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 used as security for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (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 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 funding or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just one 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 Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be happy to lend on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks very rarely finance a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with normal financing. 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 particular period of time, 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, past income, and ability to repay the debt. Thus even quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. Consequently, there is certainly a huge importance of private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we usually 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 dependent on taking a look at a combination of factors 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?
Hard money lenders in Gainesville charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, appraisal fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward terms without all of the hidden trash fees
Can the loan fees be paid from the loan proceeds?
Yes there’s a huge 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 earnings.
Will there be a pre-payment fee with hard money loans?
Typically Gainesville hard money loans have a 3–6 month minimum interest prerequisite. By way of example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so that the lender receives a modest return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre-payment penalty 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 deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when employing?
Yes, hard money loans typically demand 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 finishing a repair & flip or rehab project, 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 timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to find the borrowers experience in managing or performing property 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 even 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 largely on the asset value of the security 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 information.
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