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Hard Money Loan Florida Jacksonville
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person pick a hard money loan (asset–based loan) over a traditional loan offered 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 conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund a single 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 generally funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be pleased to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). For example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; hence the borrower will use a hard money lender settlement the hard money loan with conventional funding, 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. Nevertheless, temporary lending will be provided by a private lender 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 normal financing once the property is stabilized for a particular period of time. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal lending. Therefore, there’s a huge requirement for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We generally 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 determined by looking 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” (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 associated with asset based lending?
Hard money lenders in Jacksonville charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, appraisal fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all of the hidden trash fees and charges a very low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan proceeds.
Is there a prepayment fee with hard money loans?
For example, with a 6 pre-payment fee, 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 in order for the lender receives a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment 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 appraisal, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when implementing?
Yes, hard money loans usually require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?
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 uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security and not the credit score.
If you are 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 information.
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