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Hard Money Loan Florida Naples
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 asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years commonly) 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 choose a hard money loan (asset–based loan) over a traditional loan provided 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 conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just one 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 commonly financed within 7–14 days. (2) Property Requires 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 happy to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). For example, a loan guaranteed by a property in need of repairs is really infrequently funded by banks before it can be used; consequently the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, short-term lending will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time period, 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 heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal funding. Hence, there is an enormous need for private lenders who look 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 capital decision mainly 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 determined by looking at a combination of factors 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?
Hard money lenders in Naples charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, a loan processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without each of the rubbish fees that are hidden and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a huge 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 pre-payment penalty with hard money loans?
Ordinarily Naples hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 pre payment 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 the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, 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 price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation required when applying?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When completing a fix & flip or rehab job, what’ll the hard money lender require?
Besides the obvious 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 a guide in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers expertise 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 listed repairs. The lender will also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and not 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 info.
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