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Hard Money Loan Florida Jacksonville Beach
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary option (1–3 years usually) 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 financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund just one 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 typically financed within 7–14 days. (2) Property Requires 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 infrequently funded by banks before it can be used; therefore the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short-term financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a specific time period. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Hence, there is an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We usually 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 dependent on looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 associated with asset based lending?
Most hard money lenders in Jacksonville Beach charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, an application fee, evaluation fee from an independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without all of the hidden rubbish fees and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
Ordinarily Jacksonville Beach hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment penalty, 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 that the lender receives at least a modest yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre payment fee 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 assessment, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when employing?
Yes, hard money loans typically demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you’re looking for 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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