Hard Money Loan Florida Mascotte
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years normally) 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 affordable conventional financing: (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 fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, a personal lender will be happy to give on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks really infrequently fund a loan secured by a property in need of repairs; consequently the borrower will use a hard money lender payoff the hard money loan with conventional lending, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will give you short-term funding to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular time frame, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is certainly an enormous need for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we generally lend 65% out of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?
Most hard money lenders in Mascotte charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward conditions without each of the hidden junk fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid in the actual loan earnings.
Will 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 extra months of interest due. This requirement is put in place so that the lender receives at least a modest yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment penalty will be issued.
How quickly 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 evaluation, title commitment). The typical bargain takes about 1 to 2 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 usually require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing flip or rehab job & a fix, 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 worksheet and timeline. The lender will use this as a guide in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you’re looking for 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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