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Hard Money Loan Florida Indiantown
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the underlying collateralized asset. Traditional banks and lenders focus primarily 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 traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary option (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 choose 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 funding or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance an individual 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 commonly funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a personal lender will be happy to lend on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks really seldom finance a loan guaranteed by a property in need of repairs; so the borrower uses a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary funding will be provided by a private lender to the borrower to buy the property and rent it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal funding consistently turn down quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Hence, there is certainly 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 chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 looking at a mix 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 Indiantown charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, evaluation fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward conditions without all the junk fees that are concealed
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 each of the fees (apart from the application fee) are paid in the actual loan proceeds.
Can there be a pre payment penalty with hard money loans?
By way of example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so that the lender receives a little return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment penalty will be issued.
How quickly can a typical hard money loan 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 deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an evaluation needed?
Yes, hard money loans generally need an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing flip or rehabilitation job & a repair, 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 rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want 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 for such repairs that are listed. The lender will even require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and not 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 info.
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