Hard Money Loan Florida Ocklawaha
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. 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 collateral for the loan. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
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 more economical traditional funding: (1) Quick Funding– traditional banks take a 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 finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite infrequently fund a loan secured by a property in need of repairs; hence the borrower uses a hard money lender payoff the hard money loan with traditional 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. However, temporary lending will be provided by a personal lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional financing consistently turn down quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. So, there’s a huge requirement for private lenders who look the value of the underlying asset compared 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 typically 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 dependent upon looking at a combination of factors 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 involved with asset based lending?
Most hard money lenders in Ocklawaha charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the rubbish fees that are concealed and charges a very low origination fee of just 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 (besides the application fee) are paid from your actual loan earnings.
Will there be a pre-payment fee with hard money loans?
Normally Ocklawaha hard money loans have a 3–6 month minimum interest prerequisite. For instance, 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 condition is put in place so that the lender receives a small return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre-payment fee will be issued.
How fast 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 deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when applying?
Yes, hard money loans usually require broker price opinion, an appraisal, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehab job & a repair, what will the hard money lender require?
Well 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 will use this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the collateral and not the credit score.
If you’re 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 info.
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