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Hard Money Loan Florida Palmdale
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth 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 security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (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 a person 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 more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single 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 Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, an exclusive lender will be happy to loan on a property that either lacks cash flow or requires physical developments 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 quite seldom funded by banks before it can be used; so the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short-term funding will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. Hence, there is certainly an enormous requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 state 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 associated with asset based lending?
Most hard money lenders in Palmdale charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by a lawyer, evaluation fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward provisions without all the trash fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes there’s a large 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 proceeds.
Can there be a pre-payment fee with hard money loans?
Typically Palmdale hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment penalty will be issued.
How fast 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When finishing a repair & 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 scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehab; consequently the lender will need to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security rather than 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 advice.
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