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 chiefly on the worth of the asset that is collateralized that is underlying. 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 worth 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 someone pick 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 cheaper conventional financing: (1) Quick Funding– traditional 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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is really rarely funded by banks before it can be used; hence the borrower will use a hard money lender then, and to buy and rehabilitate the property payoff 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, a personal lender provides short-term lending to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with normal lending once the property is stabilized for a specific period of time. (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. So quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Therefore, there is an enormous importance of private lenders who look at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we generally 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 combination of factors for example: (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 in asset based lending?
Most hard money lenders in Jacksonville charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, assessment fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden junk fees and costs an extremely low origination fee of just 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 of the fees (other than the application fee) are paid in the actual loan proceeds.
Is there a prepayment 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 extra months of interest due. This requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then 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 evaluation, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required?
Yes, hard money loans generally require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehabilitation job & a repair, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; hence the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the security rather than the credit score.
If you are in need of 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 information.
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