Hard Money Loan Florida Mary Esther
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a short term option (1–3 years usually) 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 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 conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly 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. As an example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; hence the borrower uses a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with conventional lending. 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 will give you short term financing to the borrower to buy the property and rent 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 conventional funding. (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. So traditional banks for normal lending consistently turn down quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Consequently, there is certainly an enormous need for private lenders who look more at the value of the underlying asset in comparison 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 typically look for a 50% – 65% LTV in our loans. What that means is we typically 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 determined by looking at a mix of variables 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 involved with asset based lending?
Hard money lenders in Mary Esther charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, an application fee, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without each of the hidden crap fees and charges a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from the actual loan proceeds.
Is there a pre payment penalty with hard money loans?
Normally Mary Esther hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no pre payment fee 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 appraisal, title commitment). The typical price takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when using?
Yes, hard money loans usually require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?
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 a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence 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 to be made after each draw is complete. The lender will even require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral and not the credit score.
If you’re 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 advice.
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