Hard Money Loan Florida Leesburg
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 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 primarily on the worth of the asset used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short term option (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person pick 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– conventional banks take the absolute minimum of 45 days to fund 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 financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy to loan on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). For example, a loan secured by a property in need of repairs is quite rarely funded by banks before it can be used; hence the borrower will use a hard money lender payoff the hard money loan with traditional 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. Nevertheless, short term lending will be provided by a personal lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal lending consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there’s a huge importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We typically 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 generally 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 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 Leesburg charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the crap fees that are concealed 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 big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan proceeds.
Is there a pre-payment fee with hard money loans?
Typically Leesburg hard money loans have a 3–6 month minimum interest prerequisite. 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 extra months of interest due. This condition is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment fee will be issued.
How fast can a hard money loan that is typical 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 assessment, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation needed?
Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to find the borrowers experience in performing or managing 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 from the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you are 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 information.
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