Hard Money Loan Florida Jacksonville
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus primarily 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 normally for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years normally) 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 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 affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be pleased to give on a property that either lacks cash flow or necessitates physical progress 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 very seldom funded by banks; hence the borrower uses a hard money lender settlement the hard money loan with normal lending, and then to purchase 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. Yet, an exclusive lender will provide short term lending to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal lending consistently turn down even quality borrowers such as doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there’s a huge importance of private lenders who look more at the value of the underlying asset in comparison to the amount of the loan 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?
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 mix of variables 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?
Most hard money lenders in Jacksonville charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, evaluation fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward conditions without all of the concealed trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big 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.
Can there be a pre-payment fee with hard money loans?
For instance, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives 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, then no prepayment fee will be issued.
How fast 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 evaluation, title commitment). The typical price 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 evaluation required,?
Yes, hard money loans typically demand an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the security and never 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 info.
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