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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 mainly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a temporary option (1–3 years typically) 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 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 more economical traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund an individual 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 funded 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. Yet, a private lender will be happy to give on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). As an example, a loan secured by a property in need of repairs is quite rarely funded by banks before it can be used; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then 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. However, a private lender provides short-term financing 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 conventional lending. (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 traditional banks for normal funding consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Hence, there’s a huge need for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we normally 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 generally 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 location, (4) borrower’s “skin in the game” (sum 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?
Most hard money lenders in Pensacola charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the concealed crap fees and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan earnings.
Is there a pre-payment fee with hard money loans?
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 condition is put in place in order for the lender receives a modest return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, then no pre-payment penalty will be issued.
How quickly can a typical hard money loan close?
At Capital Funding Financial, we are 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.
Is an assessment needed when implementing?
Yes, hard money loans typically need an assessment, broker price opinion, or comparative sales analysis. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a repair & flip or rehab job, what will the hard money lender require?
Besides the obvious 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 tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will need to find the borrowers expertise in performing or managing property 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 will also require a credit report and income statement in the borrower to show 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 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 information.
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