Hard Money Loan Florida Melbourne
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, 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 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one 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 typically financed within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a personal lender will be happy to lend on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is really rarely funded by banks; hence the borrower will use a hard money lender settlement the hard money loan with traditional funding, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender will provide short term lending to the borrower to buy the property and rent it up. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional lending. (3) Not based exclusively 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 conventional lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. So, there is a huge importance of private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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?
Most hard money lenders in Melbourne charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the crap fees that are concealed and costs a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.
Will there be a pre payment fee with hard money loans?
Usually Melbourne hard money loans have a 3–6 month minimum interest condition. By way of 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 your lender receives at least a little yield for the time, hassle and allocation 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 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 assessment, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed,?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing flip or rehabilitation job & a fix, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral and never 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 advice.
In case you are looking for an easy method to earn over 8.5% APR without gambling in the stock market… invest in mortgage notes with Capital Funding Financial. Click here Note Investing for more advice.
Capital Funding Financial Mortgage Notes:
Post source: http://capitalfundingfinancial.com