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 mainly on the value of the asset that is collateralized 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 mainly on the worth of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term option (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 choose 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 funding 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 just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be pleased to loan 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 for instance, banks really rarely fund a loan guaranteed by a property in need of repairs; hence the borrower will use a hard money lender then, and to buy and rehabilitate the property payoff 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. Yet, an exclusive lender will give you short term funding to the borrower to buy the property and lease it up to stabilization. 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 traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Therefore, there is certainly an enormous importance of private lenders who look 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 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 on 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 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 Orlando charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, financing processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the crap fees that are concealed and costs a very low origination fee of just 2%*
Can the loan fees be paid from your 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 (apart from the application fee) are paid from the actual loan earnings.
Can there be a pre payment fee with hard money loans?
Normally Orlando 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 condition is put in place so the lender receives at least a modest return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre payment fee will be issued.
How quickly can a hard money loan that is typical 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an evaluation needed?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an independent appraisal.
When finishing a repair & flip or rehabilitation job, what will the hard money lender require?
Well besides the apparent 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 capital for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers expertise in managing or performing property 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 in the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral rather than 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 information.
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