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Hard Money Loan Florida Pompano Beach
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years commonly) 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 traditional loan offered 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 conventional financing: (1) Quick Funding– traditional 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 finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan guaranteed by a property in need of repairs is very infrequently funded by banks; hence the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a personal lender will give you short term funding to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal funding. Consequently, there is a huge importance of private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we normally 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 taking a look at a mix of variables 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” (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 in asset based lending?
Most hard money lenders in Pompano Beach charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, financing processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the concealed junk fees and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan earnings.
Will there be a prepayment penalty with hard money loans?
Usually Pompano Beach hard money loans have a 3–6 month minimum interest requirement. For example, with a 6 pre-payment 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 modest yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan 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’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 deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment needed when using?
Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing a repair & flip or rehab project, what’ll 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 timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to see the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral and not 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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