Hard Money Loan Florida Panama City
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth 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 used as collateral for the loan. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary option (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 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 a minimum of 45 days to finance just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks really infrequently finance a loan secured by a property in need of repairs before it can be used; hence the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender will give you short term lending to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a certain period of time. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Thus, there is an enormous importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of factors 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” (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 in asset based lending?
Hard money lenders in Panama City charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by an attorney, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all of the hidden junk fees and costs an incredibly low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan proceeds.
Is there a pre-payment penalty with hard money loans?
By way of 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 condition is put in place so that the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee 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 assessment, title commitment). The typical bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an appraisal needed?
Yes, hard money loans usually require an assessment, broker price opinion, or comparative sales analysis. We order an unaffiliated appraisal.
When finishing a repair & flip or rehabilitation project, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the collateral and never the credit score.
If you’re 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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