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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 chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, 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 a person 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 affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 generally financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. By way of example, banks really rarely fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender payoff the hard money loan with normal funding, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short term financing will be provided by a personal lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal financing consistently turn down quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have lots of debt. So, there is an enormous requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we usually lend 65% out 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 determined by looking at a mix of factors 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 financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward conditions without each of the concealed crap fees
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan earnings.
Will there be a pre payment fee with hard money loans?
For instance, 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 condition is put in place so the lender receives a little yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, then no pre payment penalty 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 evaluation, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment required when implementing?
Yes, hard money loans typically demand an appraisal, 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 rehabilitation job, 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 worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the security rather than the credit score.
If you’re in need of 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 advice.
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