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 asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly 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 security for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a temporary alternative (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 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 traditional funding: (1) Quick Funding– conventional banks take the absolute 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 typically funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a private lender will be happy to loan on a property that either lacks cash flow or requires 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 very rarely funded by banks; consequently the borrower uses a hard money lender payoff the hard money loan with traditional lending, 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. Yet, temporary financing will be provided by a personal lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional lending consistently turn down even quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is a huge requirement for private lenders who look 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 mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically range from 10% all the way up to 15%. 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 state and location, (4) borrower’s “skin in the game” (sum 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 Miami charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without each of the hidden junk fees and costs an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as 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 from your 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 requirement. By way of example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so your lender receives a modest yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre-payment fee will be issued.
How fast can a hard money loan that is typical 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 bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment required when employing?
Yes, hard money loans typically need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehabilitation project & a fix, 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 funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender may also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security and not the credit score.
If you’re 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 advice.
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