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Hard Money Loan Florida Lake City
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary 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 home.
Why exactly would a person pick 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 funding or a hard money loan over a cheaper traditional financing: (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 fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be happy to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, banks very rarely finance a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender will give you temporary financing to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with conventional financing. (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. So quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Thus, there’s an enormous importance of private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 looking at a combination of factors for example: (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 Lake City charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, assessment fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the junk fees that are concealed and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as 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 from the actual loan earnings.
Will there be a prepayment fee with hard money loans?
Usually Lake City hard money loans have a 3–6 month minimum interest requirement. 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 that the lender receives a modest return 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 fee will be issued.
How fast 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 assessment, title commitment). The typical deal takes about one or two 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 typically need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an independent appraisal on the subject property.
When finishing a fix & flip or rehabilitation job, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to find the borrowers experience in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you’re 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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