Best hard money loan in Melbourne

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Hard Money Loan Florida Melbourne

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 asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are normally 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 choose a hard money loan (asset–based loan) over a traditional loan offered 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 funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one 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 typically financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a personal lender will be happy to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). As an example, banks very seldom fund a loan secured by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short-term lending will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. So, there is certainly a huge need for private lenders who look the value of the underlying asset compared 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 generally 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 taking a look at a combination 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 with asset based lending?

Hard money lenders in Melbourne charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward provisions without each of the rubbish fees that are hidden

Can the loan fees be paid from the loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from your actual loan proceeds.

Can there be a prepayment fee with hard money loans?

Normally Melbourne hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, then no pre payment fee 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal required when employing?

Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.

When completing a repair & flip or rehab job, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and never the credit score.

If you are 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 information.