Hard Money Loan Florida Point Washington
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly 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 used as collateral for the loan traditional banks and lenders focus primarily 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 short-term alternative (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– traditional banks take the absolute 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 Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, a loan secured by a property in need of repairs is very rarely funded by banks; hence the borrower will use a hard money lender settlement the hard money loan with normal financing, and then to purchase 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, an exclusive lender will provide short-term lending to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is certainly a huge requirement for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly 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?
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 factors such as: (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 involved in asset based lending?
Hard money lenders in Point Washington charge financing 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, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are hidden and costs an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from the actual loan earnings.
Will there be a pre-payment penalty with hard money loans?
Typically Point Washington hard money loans have a 3–6 month minimum interest requirement. For example, 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 in order for the lender receives a small return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment fee will be issued.
How quickly can a hard money loan that is typical 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 appraisal, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment required when employing?
Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a repair & flip or rehabilitation project, what’ll 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 timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report from the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and not the credit score.
If you are 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 advice.
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