Hard Money Loan Florida Homestead
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a temporary alternative (1–3 years normally) 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 offered by a bank with lower rates?
There are many reasons why a borrower would choose to use private financing 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 typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks quite rarely finance a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide temporary financing to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a specific 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. Hence quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. So, there’s an enormous need for 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 primarily on the LTV (loan to value). We normally 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 normally range from 10% all the way up to 15%. 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 place, (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 in asset based lending?
Hard money lenders in Homestead charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, appraisal fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the crap fees that are concealed and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from the actual loan earnings.
Can there be a prepayment penalty with hard money loans?
By way of example, with a 6 prepayment fee, 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 a small yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no pre-payment fee 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an assessment needed,?
Yes, hard money loans typically demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehab project & a repair, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will need to find the borrowers expertise in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will also 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 not the credit score.
If you are 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 info.
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