Hard Money Loan Florida Moore Haven
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary solution (1–3 years normally) 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 traditional 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 cheaper conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance 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 Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be pleased to loan on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). For example, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender payoff the hard money loan with conventional 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. However, short-term financing will be provided by an exclusive lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a certain time period, a commercial lender will refinance the hard money loan with conventional lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers including doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Hence, there is certainly a huge importance of private lenders who look more at 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 ordinarily 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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?
Hard money lenders in Moore Haven charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward conditions without each of the trash fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan proceeds.
Is there a pre payment penalty with hard money loans?
By way of example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a little return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment fee will be issued.
How fast can a typical hard money loan 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 appraisal, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an evaluation needed,?
Yes, hard money loans usually require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When completing a repair & flip or rehabilitation job, 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 resources for rehab purposes. Nothing ever goes as planned when performing a rehab; thus the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security and never 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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