Hard Money Loan Florida Naples
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term 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 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 financing or a hard money loan over a more affordable traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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 typically financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, a loan secured by a property in need of repairs is quite infrequently funded by banks; hence the borrower uses a hard money lender payoff the hard money loan with normal financing, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short term lending will be provided by a personal lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers including physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional lending. Consequently, there is certainly an enormous importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we generally 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 combination 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” (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 Naples 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, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are hidden and costs a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as 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 the actual loan earnings.
Is there a pre-payment penalty with hard money loans?
Normally Naples hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives a little yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre-payment penalty will be issued.
How fast can a hard money loan that is typical 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when employing?
Yes, hard money loans generally require broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing a repair & flip or rehab job, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehab; thus the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from the borrower showing 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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