Hard Money Loan Florida Lake Worth
What is 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 asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short-term option (1–3 years typically) 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 traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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 financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks; consequently 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, temporary funding 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 period of time that is particular, 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. Hence even quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional funding. Consequently, there is a huge requirement for 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 usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 usually range from 10% all the way up to 15%. 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” (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 associated with asset based lending?
Most hard money lenders in Lake Worth charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the rubbish fees that are hidden and charges a very low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s 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 your actual loan earnings.
Is there a prepayment fee with hard money loans?
For instance, 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 the lender receives at least a small return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal required when using?
Yes, hard money loans generally require broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab project, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection 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. However, hard money lenders focus primarily on the asset value of the collateral 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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