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Hard Money Loan Florida Kissimmee
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying collateralized asset. 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 security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) 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 choose 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 more affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one 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– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). As an example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with normal financing, 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 lending will be provided by a private lender to the borrower to buy the property and lease it up. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. So, there’s an enormous requirement for private lenders who look the value of the underlying asset when compared with 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 normally 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 upon looking at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 involved with asset based lending?
Hard money lenders in Kissimmee charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without all the concealed crap fees and costs an extremely low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
Generally Kissimmee hard money loans have a 3–6 month minimum interest prerequisite. For example, 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 modest yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no pre-payment fee will be issued.
How quickly can a typical hard money loan 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 bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an evaluation required?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an appraisal. 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?
Well besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehab; therefore the lender will want to find the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security rather than the credit score.
If you are looking for 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 info.
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