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 value of the asset that is collateralized 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 worth of the asset being used as security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years typically) 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 funding or a hard money loan over a cheaper conventional funding: (1) Quick Funding– conventional banks take the absolute 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 commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks really seldom fund a loan secured by a property in need of repairs; hence the borrower will use a hard money lender settlement 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. Nonetheless, an exclusive lender provides short term funding to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time frame. (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. Hence traditional banks for conventional financing consistently turn down quality borrowers for example doctors, lawyers, and attorneys who have 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 when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We usually 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?
The rate by the lender is dependent on looking at a mix of variables 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” (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 in asset based lending?
Most hard money lenders in Miami charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, an application fee, assessment fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all the junk fees that are concealed and costs a very 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 each of the fees (apart from the application fee) are paid from your actual loan earnings.
Is there a prepayment penalty with hard money loans?
For instance, with a 6 prepayment 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 a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, 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 price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an evaluation required?
Yes, hard money loans usually require an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing a repair & flip or rehab project, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to find the borrowers experience in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security rather than the credit score.
If you are in need of 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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