Hard Money Loan Florida Lloyd
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 primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a temporary alternative (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 someone choose 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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– conventional banks take the absolute 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 quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be happy to give on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; so the borrower uses a hard money lender to buy and rehabilitate the property, and then settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a private lender will provide short-term lending to the borrower to buy the property and rent it up. Once the property is stabilized for a particular time frame, a commercial lender will refinance the hard money loan with normal financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for normal funding consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is an enormous importance of private lenders who look at 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 capital decision mostly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% 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 mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and location, (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 involved in asset based lending?
Hard money lenders in Lloyd charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, an application fee, assessment fee from an independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without all the trash fees that are hidden and charges a very low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan proceeds.
Can there be a prepayment penalty with hard money loans?
For example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement 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 six months, then no pre payment penalty will be issued.
How fast can a typical hard money loan 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 evaluation, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when employing?
Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing a repair & flip or rehab project, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender may also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the collateral and not 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 advice.
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