Hard Money Loan Florida Palmetto
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income 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 terms, hard money loans are used as a short term solution (1–3 years usually) 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 traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance 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 generally funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan secured by a property in need of repairs is very rarely funded by banks; consequently the borrower will use a hard money lender payoff the hard money loan with normal financing, 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. Yet, temporary funding 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 time frame that is particular, the hard money loan will be refinanced by a commercial lender with traditional financing. (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 quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. Consequently, there is certainly a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We generally 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?
The rate by the lender is dependent on looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 with asset based lending?
Hard money lenders in Palmetto charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all of the concealed rubbish fees and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan proceeds.
Is there a pre-payment penalty with hard money loans?
Generally Palmetto hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives a little return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment 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 evaluation, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when using?
Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an assessment. We order an independent appraisal.
When completing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Well besides the apparent 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 information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to see the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender will also require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you’re in need of 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 information.
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