Hard Money Loan Florida Hosford
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term 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 dwelling.
Why exactly would someone pick a hard money loan (asset–based loan) over a traditional loan provided 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 affordable conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance a single family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be happy to loan on a property that either lacks cash flow or requires physical improvements so long as the borrower has enough “skin in the game” (equity). As an example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks before it can be used; so the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a private lender will provide temporary funding to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time frame. (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. So traditional banks for conventional funding consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Consequently, there is an enormous requirement for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We generally 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 determined by 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” (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 Hosford 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, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward provisions without all of the crap fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre-payment fee 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 in order for the lender receives at least a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then 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 evaluation, title commitment). The typical price takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when employing?
Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the scope 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; so the lender will need to see the borrowers experience in managing or performing 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 may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral rather than 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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