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 collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan traditional banks and lenders focus mainly 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 temporary solution (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone pick 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 traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 typically funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to loan on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). As an example, banks really seldom finance a loan secured by a property in need of repairs before it can be used; so the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff 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, a personal lender will give you temporary financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a particular time period, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal lending. Therefore, there is an enormous requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 on looking at a combination of factors such as: (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?
Most 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 an attorney, evaluation fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward conditions without each of the junk fees that are hidden
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 of the fees (other than the application fee) are paid from the actual loan earnings.
Can there be a pre payment fee with hard money loans?
Typically Naples hard money loans have a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives at least a modest return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment penalty will be issued.
How fast 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 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 applying is an appraisal needed?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a repair & flip or rehab project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security and not the credit score.
If you’re 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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