Hard Money Loan Florida Long Key
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
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 cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute 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 finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, banks really rarely finance a loan guaranteed by a property in need of repairs; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with conventional funding. 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 provides short term funding to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Therefore, there is certainly a huge 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 usually look for a 50% – 65% LTV in our loans. What that means is we generally 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 upon taking a look at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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?
Hard money lenders in Long Key charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, financing processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed junk fees and costs 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 all of the fees (besides the application fee) are paid from the actual loan proceeds.
Will there be a prepayment penalty with hard money loans?
For example, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a little return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, 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 bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an assessment required?
Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a repair & flip or rehabilitation project, what will the hard money lender require?
Besides the apparent 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 a guide in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will need to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you’re 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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