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Hard Money Loan Florida Orlando
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying collateralized asset. 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 being used as collateral for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short-term option (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person 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 financing: (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 finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. As an example, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; hence the borrower uses a hard money lender payoff the hard money loan with conventional lending, and then rehabilitate and to purchase 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, short term funding 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 certain time frame, a commercial lender will refinance the hard money loan with normal funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for normal lending consistently turn down even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Hence, there is an enormous need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We typically 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 generally range from 10% all the way up to 15%. 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 involved in asset based lending?
Hard money lenders in Orlando charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the trash fees that are hidden and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as 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.
Is there a prepayment penalty with hard money loans?
Typically Orlando hard money loans have a 3–6 month minimum interest condition. By way of example, 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 requirement is put in place so your lender receives a small return for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty 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 assessment, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; so the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral and never the credit score.
If you’re looking for 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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