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Hard Money Loan Florida Key Colony 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 collateralized asset that is underlying. Traditional banks and lenders focus primarily on the credit and income 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 conventional loans are normally for 15–20 year durations, hard money loans are used as a short term alternative (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person 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 more affordable conventional funding: (1) Quick Funding– traditional 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 Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to lend on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For instance, banks really infrequently fund a loan secured by a property in need of repairs before it can be used; so the borrower uses a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with normal financing. 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 give you temporary funding to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal funding consistently turn down even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Therefore, there’s a huge need for private lenders who look the value of the underlying asset compared to 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 normally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 involved with asset based lending?
Hard money lenders in Key Colony Beach charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, appraisal fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without each of the hidden rubbish fees and costs 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 large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from your actual loan earnings.
Will there be a pre payment fee with hard money loans?
By way of example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives at least a little yield 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 penalty will be issued.
How fast 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 evaluation, title commitment). The typical price takes about 1 to 2 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 generally need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When completing flip or rehab project & a fix, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and not 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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