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Hard Money Loan Florida Lakeland
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan traditional banks and lenders focus primarily 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 temporary solution (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 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 financing or a hard money loan over a more affordable traditional funding: (1) Quick Funding– conventional 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 finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, a loan guaranteed by a property in need of repairs is really rarely funded by banks before it can be used; therefore the borrower uses a hard money lender then, and rehabilitate and to buy the property settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary funding will be provided by a personal lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a particular period of time, 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. Thus quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal funding. So, there’s an enormous requirement 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 generally look for a 50% – 65% LTV in our loans. What that means is we generally 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 variables 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 with asset based lending?
Most hard money lenders in Lakeland charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, appraisal fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward terms without all of the concealed trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from your actual loan proceeds.
Is there a pre payment fee with hard money loans?
By way of 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 requirement is put in place so the lender receives at least a little yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently 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 assessment, title commitment). The typical price takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal required when applying?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehabilitation project & a repair, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers experience in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will also require income statement and a credit report in 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 and not 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 advice.
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Links:
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