Hard Money Loan Florida Miami
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where conventional loans are normally 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 dwelling.
Why exactly would someone pick 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund one 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 typically financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be happy to loan on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). For example, a loan guaranteed by a property in need of repairs is really seldom funded by banks before it can be used; so the borrower will use a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short term funding will be provided by a personal lender to the borrower to buy the property and rent it up. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based entirely 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 normal financing consistently turn down quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Consequently, there is an enormous requirement for private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 taking a look at a combination of factors for example: (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 associated with asset based lending?
Hard money lenders in Miami charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, evaluation fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward terms without all of the concealed junk fees
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan earnings.
Can there be a pre payment penalty with hard money loans?
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 a small yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, then no pre-payment penalty will be issued.
How quickly can a hard money loan that is typical 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 price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an appraisal required?
Yes, hard money loans generally need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing a fix & flip or rehabilitation job, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender may also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you are looking for 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.
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