Hard Money Loan Florida Marathon Shores
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary 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 dwelling.
Why exactly would a person 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 cheaper traditional funding: (1) Quick Funding– traditional banks take a 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 commonly financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For example, banks really infrequently finance a loan secured by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender provides short term lending to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. Consequently traditional banks for normal financing consistently turn down even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. So, there’s an enormous need for private lenders who look the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of variables such as: (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 involved in asset based lending?
Hard money lenders in Marathon Shores 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, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward provisions without all of the crap fees that are hidden
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 (apart from the application fee) are paid from the actual loan earnings.
Is there a pre payment fee with hard money loans?
Generally Marathon Shores hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no pre payment penalty 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When finishing a repair & flip or rehabilitation project, what’ll 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 worksheet and timeline. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; so the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security and never the credit score.
If you’re 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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