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Hard Money Loan Florida Longwood
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short term solution (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 traditional 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 economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally 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 needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is quite rarely funded by banks; so the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short-term lending will be provided by an exclusive lender to the borrower to buy the property and rent it up. Once the property is stabilized for a particular period of time, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional financing. Hence, there is certainly a huge requirement for private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we normally lend out 65% of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is determined by looking 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” (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 Longwood charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward terms without all the hidden crap fees
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 of the fees (apart from the application fee) are paid from your actual loan earnings.
Is there a pre-payment penalty with hard money loans?
For instance, 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 condition is put in place in order for the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no prepayment penalty will be issued.
How quickly 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 appraisal, title commitment). The typical price takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an evaluation required,?
Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an independent appraisal.
When completing a fix & flip or rehab project, what will the hard money lender require?
Well 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 will use this as helpful information in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and never 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 info.
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