Hard Money Loan Florida Palm Harbor
What is 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 asset that is collateralized. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year periods, 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 dwelling.
Why exactly would someone 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single 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 financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. However, a personal lender will be pleased to lend on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan guaranteed by a property in need of repairs; hence the borrower will use a hard money lender settlement the hard money loan with conventional lending, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary lending will be provided by a private lender to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, a commercial lender will refinance the hard money loan with traditional 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. Hence quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. So, there is a huge need for private lenders who look at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we generally 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 upon taking a look at a combination of variables for example: (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 with asset based lending?
Most hard money lenders in Palm Harbor charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by an attorney, an application fee, appraisal fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without each of the hidden rubbish fees and costs a very low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid in the actual loan earnings.
Can there be a prepayment penalty with hard money loans?
For instance, with a 6 prepayment penalty, if the borrower were 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 little return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.
How quickly 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 appraisal, title commitment). The typical deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when implementing?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehab project & a fix, 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 timeline and worksheet. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, 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 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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