Hard Money Loan Florida Jacksonville
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where traditional loans are generally for 15–20 year terms, 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 home.
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 financing or a hard money loan over a more economical traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 commonly funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be happy to loan on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks quite rarely finance a loan guaranteed by a property in need of repairs; hence the borrower uses a hard money lender then, and rehabilitate and to purchase the property 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. Yet, temporary funding will be provided by a private lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Hence, there is a huge need for private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we normally 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 typically range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Hard money lenders in Jacksonville charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, assessment fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the rubbish fees that are hidden and costs an incredibly low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s a huge 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 penalty with hard money loans?
By way of example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives at least a modest return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre payment penalty will be issued.
How fast 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 appraisal, 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.
When implementing is an assessment needed,?
Yes, hard money loans usually require an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing a repair & flip or rehabilitation job, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you’re in need of 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 info.
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