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 chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mainly 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 collateral for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short term option (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 conventional 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 economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual family residential loan, any where between 60–90 days to fund 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– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. However, a personal lender will be pleased to loan on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). As an example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; hence the borrower uses a hard money lender payoff the hard money loan with normal 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. Nonetheless, an exclusive lender will give you temporary lending to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with normal financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Consequently, there’s a huge need for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We normally 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 dependent on looking at a mix of factors such as: (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 amount of the loan. Various fees for document preparation will then charge by an attorney, a loan processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward terms without all the concealed trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid in the actual loan earnings.
Will there be a prepayment penalty with hard money loans?
Ordinarily Melbourne hard money loans have a 3–6 month minimum interest requirement. 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 in order for the lender receives at least a little yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, 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 evaluation, title commitment). The typical deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an appraisal needed?
Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing a repair & flip or rehabilitation job, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security and not the credit score.
If you are 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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