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Hard Money Loan Florida Holiday
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 underlying asset that is collateralized. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) 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 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– conventional banks take a minimum of 45 days to fund just one 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 typically financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, banks really seldom fund a loan guaranteed by a property in need of repairs; therefore the borrower will use a hard money lender settlement the hard money loan with traditional lending, and then rehabilitate and to buy 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, short term lending will be provided by a personal lender to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a certain period of time. (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. Consequently traditional banks for conventional financing consistently turn down even quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there is certainly an enormous requirement for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We usually 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?
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 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 involved with asset based lending?
Most hard money lenders in Holiday charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, evaluation fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward provisions without all the rubbish fees that are concealed
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 all the fees (apart from the application fee) are paid in the actual loan earnings.
Will there be a pre payment penalty with hard money loans?
By way of example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment 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 bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an appraisal needed,?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When finishing flip or rehab project & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers expertise in performing or managing real estate 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 income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you’re 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 information.
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Links:
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