Hard Money Loan Florida Ocala
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. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term alternative (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 traditional 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 more economical traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks quite seldom finance a loan guaranteed by a property in need of repairs; hence the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, temporary funding will be provided by an exclusive lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal funding consistently turn down even quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is an enormous requirement for private lenders who look more at the value of the underlying asset in comparison 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 ordinarily 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 looking at a combination of variables such as: (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 involved in asset based lending?
Hard money lenders in Ocala charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all the crap fees that are concealed and charges a very low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid in the actual loan proceeds.
Will there be a prepayment fee with hard money loans?
Normally Ocala hard money loans have a 3–6 month minimum interest prerequisite. For instance, with a 6 pre-payment penalty, 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 in order for the lender receives a modest return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee 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 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 typically need an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you are 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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