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 primarily on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short term option (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
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 more economical traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance 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 Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan secured by a property in need of repairs is very seldom funded by banks before it can be used; so the borrower will use a hard money lender payoff the hard money loan with normal funding, and then rehabilitate and to purchase 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, temporary funding 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 specific, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for normal financing consistently turn down even quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Consequently, there’s an enormous requirement for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we typically 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 upon looking at a mix of variables for example: (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 associated with asset based lending?
Most hard money lenders in Miami charge a loan 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 an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward terms without all of the hidden trash fees
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan proceeds.
Is there a prepayment fee with hard money loans?
Normally Miami hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives at least a modest return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no prepayment 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 bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an appraisal needed?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an assessment. We order an appraisal that is independent on the subject property.
When finishing flip or rehabilitation job & a fix, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender will even require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and not the credit score.
If you are in need of 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 information.
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