Hard Money Loan Florida Orlando
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying collateralized asset. 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 value of the asset used as collateral for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short term option (1–3 years usually) 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 choose a hard money loan (asset–based loan) over a conventional 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 affordable traditional 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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). For example, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; so the borrower will use a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a personal lender will provide short-term financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal lending. Therefore, there’s a huge need for private lenders who look the value of the underlying asset when compared with 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 ordinarily lend 65% out 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 taking a look at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 with asset based lending?
Most hard money lenders in Orlando charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, an application fee, evaluation fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all the concealed crap fees and costs an incredibly 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 all the fees (besides the application fee) are paid from the actual loan proceeds.
Can there be a pre payment fee with hard money loans?
For 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 requirement is put in place so that the lender receives a small yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then 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 assessment, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When finishing flip or rehabilitation job & a fix, what will the hard money lender require?
Besides the apparent 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 rehab purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will even require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security and not the credit score.
If you are 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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