Hard Money Loan Florida Miami
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a short term option (1–3 years typically) 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 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 affordable traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one 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 Demands Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be happy to lend on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For example, banks really seldom finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender provides temporary financing to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with normal funding. (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. Thus even quality borrowers such as for instance doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Hence, there’s an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 looking at a mix of variables 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?
Most hard money lenders in Miami charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden crap fees and charges an extremely low origination fee of merely 2%*
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 (other than the application fee) are paid in the actual loan proceeds.
Is there a pre-payment fee with hard money loans?
For example, 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 so your lender receives a modest yield for the time, hassle and apportionment of its funds to your 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 assessment, title commitment). The typical price takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When finishing a fix & flip or rehab job, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; thus 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 for such listed repairs. 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 mainly on the asset value of the collateral and not the credit score.
If you’re 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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