Hard Money Loan Florida North Palm Beach
What is 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 primarily on the worth of the asset used as security for the loan. Where traditional loans are normally for 15–20 year periods, 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 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 more economical conventional 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 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– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be happy 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). For instance, a loan secured by a property in need of repairs is really rarely funded by banks before it can be used; consequently the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide short term lending to the borrower to purchase the property and lease it up. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. Hence, there is a huge need for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We generally 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 determined by taking a look at a combination of variables 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” (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?
Most hard money lenders in North Palm Beach charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of only 2%* and offers straight forward terms without all the crap fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes there’s a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan proceeds.
Is there a prepayment fee with hard money loans?
By way of 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 that the lender receives at least a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then no pre-payment penalty 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 bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment required when using?
Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an assessment. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehabilitation job & a repair, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will need to see the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and never 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.
Click the link Note Investing for more advice.
Capital Funding Financial Mortgage Notes:
Article source: http://capitalfundingfinancial.com