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 mainly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term alternative (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 conventional loan offered 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 traditional financing: (1) Quick Funding– conventional 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 generally funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. As an example, banks very rarely fund a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender settlement the hard money loan with conventional 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. Nonetheless, a personal lender provides short-term financing to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a certain period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for normal funding. So, there is certainly an enormous need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 normally 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 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 associated with asset based lending?
Hard money lenders in Jacksonville Beach charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, an application fee, appraisal fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without all the hidden trash fees and charges a very low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid in the actual loan proceeds.
Is there a pre-payment 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 additional months of interest due. This requirement is put in place so that the lender receives a modest yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan 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 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 assessment, 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 need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing a fix & flip or rehabilitation job, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want 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 rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will even require a credit report and income statement in the borrower showing 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 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 advice.
Click here Note Investing for more info.
Capital Funding Financial Mortgage Notes:
Post source: http://capitalfundingfinancial.com