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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 mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit 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 periods, hard money loans are used as a short-term option (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 someone 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 affordable conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund one 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 generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, an exclusive lender will be pleased to lend on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). As an example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; therefore the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary lending will be provided by a personal lender to the borrower to buy the property and lease it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with conventional financing. (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. Hence traditional banks for normal financing consistently turn down quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. So, there’s an enormous importance of private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a mix of variables 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?
Most hard money lenders in Jacksonville charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by a lawyer, a loan processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward provisions without all of the hidden junk fees
Can the loan fees be paid from your loan proceeds?
Yes there is a big 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 penalty with hard money loans?
Normally Jacksonville hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a small 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 prepayment penalty will be issued.
How quickly 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 evaluation, title commitment). The typical bargain 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 appraisal required,?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing flip or rehabilitation job & a fix, what will the hard money lender require?
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 helpful information in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; therefore the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral rather than 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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Links:
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