Hard Money Loan Florida Neptune Beach
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a short-term option (1–3 years normally) 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 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 cheaper conventional funding: (1) Quick Funding– conventional banks take a 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 generally financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be happy to loan on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). For instance, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; hence the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary funding will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular time frame, 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 greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional funding. So, there is a huge requirement for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We normally 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 mix 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” (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 Neptune Beach 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, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all of the crap fees that are concealed and costs an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from your actual loan earnings.
Can there be a prepayment fee with hard money loans?
For instance, 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 requirement is put in place so your lender receives at least a small yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no prepayment fee will be issued.
How quickly 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 assessment, 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.
When employing is an appraisal required,?
Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab project, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; therefore the lender will want to see 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 may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and not the credit score.
If you’re looking for 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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