Hard Money Loan Florida Lake Worth
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying collateralized asset. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a short-term alternative (1–3 years commonly) 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 traditional loan offered 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 conventional financing: (1) Quick Funding– traditional banks take a 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 typically financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, banks quite infrequently fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with traditional financing, and then rehabilitate and to purchase the property. 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 an exclusive lender to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a certain time period. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So traditional banks for normal funding consistently turn down even quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Thus, there is an enormous need 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 typically 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 looking at a combination of factors 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 Lake Worth charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward terms without all the rubbish fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from the actual loan earnings.
Is there a prepayment penalty with hard money loans?
For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives a modest return 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 penalty 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 appraisal, title commitment). The typical bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an evaluation required,?
Yes, hard money loans generally require an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a repair & flip or rehabilitation project, 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 timeline and worksheet. The lender will use this as a guide in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily 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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