Hard Money Loan Florida Lake Wales
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a short term 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 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– traditional banks take the absolute minimum of 45 days to finance a single 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 generally funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan guaranteed by a property in need of repairs is quite seldom funded by banks; therefore the borrower will use a hard money lender settlement the hard money loan with conventional funding, and then to buy and rehabilitate 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 personal lender to the borrower to buy the property and rent 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 traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. So, there’s a huge requirement for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 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” (amount 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 financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, financing processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the trash fees that are hidden and costs a very low origination fee of only 2%*
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 from the actual loan proceeds.
Is there a pre-payment fee with hard money loans?
By way of example, with a 6 pre payment fee, 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 your lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan 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’re 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when employing?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When completing a repair & flip or rehab job, what’ll the hard money lender require?
Well 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 helpful information in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and not the credit score.
If you’re 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 information.
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