Hard Money Loan Florida Ponce De Leon
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the underlying collateralized asset. 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 worth of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short term option (1–3 years usually) 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 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 affordable conventional financing: (1) Quick Funding– traditional 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 fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks very infrequently fund a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement 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. Yet, short term lending will be provided by a personal lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is particular, 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. Hence traditional banks for normal funding consistently turn down even quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there’s an enormous requirement for private lenders who look more at 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 capital decision primarily on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 dependent on looking at a mix of variables for example: (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 associated with asset based lending?
Most hard money lenders in Ponce De Leon 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, assessment fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward terms without each of the hidden crap fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan earnings.
Can there be a pre-payment penalty with hard money loans?
Usually Ponce De Leon hard money loans have a 3–6 month minimum interest prerequisite. 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 condition is put in place so the lender receives at least a modest 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 prepayment fee will be issued.
How fast 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 assessment, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when employing?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find 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 repairs that are listed. The lender will also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly 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 info.
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