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Hard Money Loan Florida Otter Creek
What’s hard money loan?
A hard money loan is a loan given to your 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 used as security for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person 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 financing or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance an individual 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 generally funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a personal lender will be happy to loan on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term lending will be provided by a private lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional funding consistently turn down quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Consequently, there is an enormous importance of private lenders who look at the value of the underlying asset when compared 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 normally lend 65% out 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 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 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 associated with asset based lending?
Most hard money lenders in Otter Creek charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all the crap fees that are concealed and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes 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 in the actual loan earnings.
Is there a pre-payment fee with hard money loans?
Generally Otter Creek hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 prepayment penalty, 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 your lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee will be issued.
How quickly 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 appraisal, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when implementing?
Yes, hard money loans usually demand an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When completing a fix & flip or rehabilitation job, what’ll 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 tips in releasing resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender will also require income statement and a credit report 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 security 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 advice.
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