Hard Money Loan Florida Orlando
What is 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 chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security 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 commonly) 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 cheaper conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund 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 commonly funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks really rarely finance a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff 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. Yet, temporary financing will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional funding. (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. So traditional banks for conventional funding consistently turn down even quality borrowers including doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there is certainly an enormous need for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We usually 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?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of factors 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?
Most hard money lenders in Orlando charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, appraisal fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without each of the concealed rubbish fees 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 large enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan proceeds.
Is there a pre-payment penalty with hard money loans?
For instance, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives a modest yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.
How fast 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 deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an assessment needed?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When finishing a repair & flip or rehabilitation project, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and not 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 information.
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