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Hard Money Loan Florida Miami
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the collateralized asset 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 worth of the asset used as security for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years commonly) 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 choose a hard money loan (asset–based loan) over a conventional 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– traditional banks take a minimum of 45 days to finance a single 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 generally financed within 7–14 days. (2) Property Needs 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 lend on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks; consequently the borrower will use a hard money lender payoff the hard money loan with traditional financing, 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 private lender will give you temporary lending to the borrower to buy the property and rent it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional funding consistently turn down quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Therefore, there is an enormous requirement for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Hard money lenders in Miami charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward provisions without all of the crap fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes there’s a large 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.
Is there a pre payment fee with hard money loans?
Ordinarily Miami hard money loans have a 3–6 month minimum interest prerequisite. For instance, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives at least a little yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no prepayment 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 appraisal, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when applying?
Yes, hard money loans generally require an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a repair & flip or rehabilitation project, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender may 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 mostly on the asset value of the collateral and never 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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