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Hard Money Loan Florida Indian Lake Estates
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. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a short term alternative (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person 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 traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, banks really seldom finance a loan secured by a property in need of repairs before it can be used; so the borrower uses a hard money lender then, and rehabilitate and to purchase 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. Yet, short-term financing will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. So, there is a huge importance of private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we normally lend out 65% 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 upon taking a look at a mix of factors 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 involved with asset based lending?
Most hard money lenders in Indian Lake Estates charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward conditions without all the concealed trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan earnings.
Can there be a pre-payment fee 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 so your lender receives a little return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment penalty will be issued.
How fast 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 bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when employing?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers experience in performing or managing real estate 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 a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the security and never the credit score.
If you’re looking for a hard money loan for a rehab, 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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