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 worth of the asset that is collateralized 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 worth of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short-term 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 a person choose a hard money loan (asset–based loan) over a traditional loan provided 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 economical traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. For example, a loan secured by a property in need of repairs is very seldom funded by banks before it can be used; so the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term lending will be provided by a personal lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. Hence traditional banks for conventional lending consistently turn down even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there is a huge importance of private lenders who look the value of the underlying asset in comparison 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 usually 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 combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 involved in asset based lending?
Most hard money lenders in Kissimmee charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, an application fee, assessment fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward provisions without all of the hidden rubbish fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid in the actual loan proceeds.
Is there a prepayment fee with hard money loans?
Ordinarily Kissimmee hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives a small return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower 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 appraisal, title commitment). The typical bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed?
Yes, hard money loans usually require 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 flip or rehab job & a fix, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need 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 need to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. 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 security and not 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 info.
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