Hard Money Loan Florida Graceville
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily 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 traditional loans are generally for 15–20 year periods, 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 home.
Why exactly would someone 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 cheaper conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one 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 generally funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a personal lender will be pleased to give 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 by way of example, banks very seldom finance a loan secured by a property in need of repairs; so the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then rehabilitate and to purchase the property. 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 give you temporary funding to the borrower to buy the property and lease it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with conventional funding. (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. Consequently 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 conventional lending. Consequently, there is a huge importance of private lenders who look at the value of the underlying asset in comparison to 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 usually lend out 65% 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 dependent on taking a look 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 involved with asset based lending?
Most hard money lenders in Graceville charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the trash fees that are concealed 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 (other than the application fee) are paid from the actual loan proceeds.
Can there be a pre payment fee with hard money loans?
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 condition is put in place so the lender receives a little return for the time, hassle and allocation of its funds to a 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 evaluation, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal required?
Yes, hard money loans generally require broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing flip or rehabilitation job & a repair, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the security and not the credit score.
If you are in need of a hard money loan for a rehabilitation, 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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