Hard Money Loan Florida Jacksonville
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value of the collateralized asset that is underlying. 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 used as security for the loan. Where traditional loans are normally 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 someone pick a hard money loan (asset–based loan) over a conventional loan offered 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 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 needing repair. Before it can be used as an example, banks really seldom fund a loan secured by a property in need of repairs; hence the borrower will use a hard money lender payoff the hard money loan with traditional lending, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term lending will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a particular period of time. (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. Hence traditional banks for conventional lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Hence, there is certainly a huge importance of private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we usually 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (4) borrower’s “skin in the game” (amount 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 in asset based lending?
Hard money lenders in Jacksonville charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, financing processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the rubbish fees that are hidden and costs a very low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.
Will there be a pre payment penalty with hard money loans?
For instance, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives a modest yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.
How fast can a typical hard money loan close?
At Capital Funding Financial, we’re a direct lender and have the ability to close loans within a days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed,?
Yes, hard money loans usually need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a fix & flip or rehab job, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; hence the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral 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 information.
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