Hard Money Loan Florida Miami Beach
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 underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) 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 financing or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional 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 fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, a loan guaranteed by a property in need of repairs is really seldom funded by banks before it can be used; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement 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. However, an exclusive lender will give you short term financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (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. Consequently quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Hence, there is a huge need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we normally 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 taking a look 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” (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 involved in asset based lending?
Most hard money lenders in Miami Beach charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the concealed junk fees and costs a very low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid in the actual loan earnings.
Can there be a pre payment fee with hard money loans?
Ordinarily Miami Beach hard money loans have a 3–6 month minimum interest prerequisite. By way of example, with a 6 prepayment 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 at least a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan 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’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 evaluation, title commitment). The typical bargain takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal required when employing?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an assessment. We order an appraisal that is independent on the subject property.
When completing flip or rehabilitation project & a repair, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehab; hence the lender will need 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 repairs that are listed. The lender will also require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the security and not 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 info.
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