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Hard Money Loan Florida O Brien
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly 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 alternative (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 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 traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 generally financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks very rarely fund a loan guaranteed by a property in need of repairs; consequently the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary lending will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with conventional financing. (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 quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. Consequently, there’s a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). 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?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a combination of factors such as: (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?
Most hard money lenders in O Brien charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, evaluation fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the concealed rubbish fees and costs an extremely low origination fee of merely 2%*
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 each 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?
Ordinarily O Brien hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a small yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee will be issued.
How quickly 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 price takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when implementing?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing a fix & flip or rehabilitation project, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the security rather than 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 info.
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