Hard Money Loan Florida Homosassa Springs
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly 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 conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary 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 a person pick 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 affordable traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 generally financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be pleased to give on a property that either lacks cash flow or necessitates physical advancements 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 uses a hard money lender to purchase and rehabilitate 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. Yet, short-term financing will be provided by a personal lender 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 normal funding once the property is stabilized for a certain time frame. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal financing. Hence, there is a huge need for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables such as: (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?
Most hard money lenders in Homosassa Springs charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of only 2%* and offers straight forward terms without each of the concealed junk fees
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 of the fees (apart from the application fee) are paid from your actual loan earnings.
Is there a pre payment penalty with hard money loans?
For example, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty will be issued.
How quickly can a hard money loan that is typical 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 bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an assessment required?
Yes, hard money loans typically need an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing a fix & flip or rehabilitation project, what’ll 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 timeline and worksheet. The lender uses this as a guide in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly 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 advice.
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