Hard Money Loan Florida Lakeland
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly 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 security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, 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 economical 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 funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; hence the borrower will use a hard money lender rehabilitate and to buy 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. Nonetheless, a private lender will give you short term financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional financing consistently turn down even quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Hence, there is an enormous need for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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?
Hard money lenders in Lakeland 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, an application fee, appraisal fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all of the rubbish fees that are hidden and charges an incredibly low origination fee of just 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 all the fees (besides the application fee) are paid from your actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
Normally Lakeland hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 pre payment penalty, 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 small yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no prepayment penalty will be issued.
How quickly 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an assessment required?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers expertise in managing or performing real estate 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 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 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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