Hard Money Loan Florida Key West
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term solution (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 pick 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 funding or a hard money loan over a cheaper traditional 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 fund 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 Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, a loan secured by a property in need of repairs is really rarely funded by banks; hence the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then rehabilitate and to buy 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, short-term financing will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional funding. (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. Thus even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional financing. Thus, there is a huge importance of private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 taking a look at a mix 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?
Hard money lenders in Key West charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward conditions without all of the rubbish fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan proceeds.
Will there be a pre-payment penalty with hard money loans?
Generally Key West hard money loans have a 3–6 month minimum interest requirement. For instance, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra 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 some borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty 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 appraisal, 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 applying is an evaluation needed,?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab project, what will the hard money lender require?
Besides the obvious 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 tips in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you’re in need of 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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