Hard Money Loan Florida Panama City
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. 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 generally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years commonly) 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 economical conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund 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 commonly funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks quite seldom fund a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, 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 specific time period, the hard money loan will be refinanced by a commercial lender with normal financing. (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. Hence traditional banks for conventional lending consistently turn down even quality borrowers including physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there is certainly a huge requirement for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We usually 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 on taking a look at a combination of factors 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” (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 associated with asset based lending?
Most hard money lenders in Panama City charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward conditions without all of the concealed crap fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big 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 earnings.
Is there a pre payment penalty with hard money loans?
For example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place in order for the lender receives a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no prepayment fee will be issued.
How fast can a typical hard money loan 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 a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an assessment needed?
Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When completing flip or rehabilitation project & a fix, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security 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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