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Hard Money Loan Florida Lake Wales
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth 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 mainly on the value of the asset used as security for the loan. Where traditional loans are generally for 15–20 year periods, 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 dwelling.
Why exactly would someone 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 financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single 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 financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, a loan secured by a property in need of repairs is quite seldom funded by banks; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with conventional 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 private lender will give you short-term funding to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal lending consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Therefore, there’s a huge need for private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we typically lend 65% out 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 combination of factors 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 involved in asset based lending?
Hard money lenders in Lake Wales charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the concealed junk fees and charges an extremely 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 (other than the application fee) are paid from the actual loan proceeds.
Is there a prepayment penalty with hard money loans?
Ordinarily Lake Wales hard money loans have a 3–6 month minimum interest condition. For instance, 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 a small return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation required,?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing a fix & flip or rehabilitation job, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to find the borrowers expertise in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender may also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the security rather than the credit score.
If you are 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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Links:
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