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Hard Money Loan Florida Jacksonville
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where conventional 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 home.
Why exactly would a person 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 funding or a hard money loan over a cheaper conventional financing: (1) Quick Funding– conventional 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 funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be happy to lend on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan secured by a property in need of repairs is really infrequently funded by banks; so the borrower uses a hard money lender to buy and rehabilitate the property, and then settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender provides temporary financing to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a specific time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal lending consistently turn down quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is an enormous requirement for private lenders who look the value of the underlying asset compared to 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 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 combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (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 with asset based lending?
Hard money lenders in Jacksonville charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are hidden and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan earnings.
Will there be a prepayment fee with hard money loans?
For example, with a 6 pre-payment penalty, 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 the lender receives at least a modest return for the time, hassle and apportionment 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 hard money loan that is typical 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 appraisal, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehab job & a fix, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender may also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly 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 information.
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