Hard Money Loan Florida Pensacola
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short term option (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 conventional 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 funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 generally financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, banks really seldom finance a loan guaranteed by a property in need of repairs; hence the borrower will use a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you short term lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal financing consistently turn down even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there is an enormous need 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. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend out 65% 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 upon taking a look 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 Pensacola charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by a lawyer, evaluation fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without all the junk fees that are concealed and charges a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid in the actual loan earnings.
Will there be a pre payment penalty with hard money loans?
Typically Pensacola 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 additional months of interest due. This requirement is put in place so that the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your 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 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 assessment, title commitment). The typical price takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an assessment required?
Yes, hard money loans generally 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 completing flip or rehab project & a fix, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you are in need of 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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