Hard Money Loan Florida Homosassa
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term 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 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 conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single 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 commonly financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be happy to give on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks; therefore the borrower will use a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a private lender will provide short-term funding to the borrower to purchase 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 certain time period. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. So, there is a huge importance of private lenders who look at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital 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 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 determined by looking 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” (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 associated with asset based lending?
Hard money lenders in Homosassa charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, financing processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward terms without all of the junk fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan earnings.
Is there a prepayment fee with hard money loans?
For example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives a little return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.
How quickly can a typical hard money loan 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal required when implementing?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing flip or rehabilitation project & a repair, what will the hard money lender require?
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 information in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; hence 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. The lender will also require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security and never 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 information.
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