Hard Money Loan Florida Panacea
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized 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 mainly on the value of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary 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 someone 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 financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just one 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– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a private lender will be pleased to loan on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks; therefore the borrower uses a hard money lender to purchase and rehabilitate the property, and then 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. Nonetheless, an exclusive lender will provide short-term funding to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a particular period of time. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus traditional banks for conventional funding consistently turn down quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there is certainly an enormous requirement for private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 usually range from 10% all the way up to 15%. The rate by the lender is determined by looking at a combination of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 Panacea charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, a loan processing fee, appraisal fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward conditions without all the rubbish fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.
Will there be a prepayment penalty with hard money loans?
Ordinarily Panacea hard money loans have a 3–6 month minimum interest prerequisite. For example, 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 condition is put in place so the lender receives a modest yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently 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 evaluation, title commitment). The typical deal takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
Is an appraisal required when using?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing a fix & flip or rehab project, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to see the borrowers expertise 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 for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral and not 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 info.
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