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Hard Money Loan Florida Pensacola
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly 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 primarily on the value of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year periods, 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 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 funding or a hard money loan over a cheaper traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks; so the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement 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. Nonetheless, short term financing will be provided by a personal lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a certain time frame. (3) Not based exclusively 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 normal funding consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Therefore, there’s a huge need for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision chiefly on the LTV (loan to value). We typically 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?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of variables such as: (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 associated with asset based lending?
Hard money lenders in Pensacola charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward provisions without all of the junk fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge 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 earnings.
Will there be a pre payment fee with hard money loans?
For example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement 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 six months, subsequently 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.
Is an appraisal needed when applying?
Yes, hard money loans typically demand broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to see the borrowers experience in managing or performing 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 may also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the security rather than the credit score.
If you are 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 advice.
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