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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 value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years commonly) 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 more affordable conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, banks really rarely fund a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement 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, short term funding will be provided by a private lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal financing consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have lots of debt. So, there is an enormous importance of private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 Holiday charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward terms without all the trash fees that are concealed
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 each of the fees (other than the application fee) are paid from your actual loan earnings.
Can there be a pre-payment fee with hard money loans?
Typically Holiday hard money loans have a 3–6 month minimum interest condition. For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre payment penalty will be issued.
How fast can a typical hard money loan 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 appraisal, 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.
Is an assessment needed when applying?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing a repair & flip or rehab job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to find the borrowers experience in performing or managing 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 income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you’re looking for 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 information.
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Links:
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