Hard Money Loan Florida Niceville
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short-term option (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person pick 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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional 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 fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks very seldom fund a loan guaranteed by a property in need of repairs; consequently the borrower uses a hard money lender payoff the hard money loan with conventional funding, 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, temporary lending will be provided by a personal lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional financing consistently turn down quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Consequently, there is an enormous importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we usually lend out 65% of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Hard money lenders in Niceville charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, financing processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward provisions without each of the hidden trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from your actual loan earnings.
Can there be a pre payment fee with hard money loans?
For instance, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives a modest 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, subsequently no pre payment penalty 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 fund as an independent appraisal and title report need to be run on the property.
When using is an appraisal required?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an unaffiliated appraisal.
When finishing flip or rehab project & a repair, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; thus the lender will need to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection and will release funds in draws. The lender may also require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security and not the credit score.
If you’re 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 advice.
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