Hard Money Loan Florida Port Charlotte
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mostly on income and the credit 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 normally for 15–20 year terms, hard money loans are used as a short-term 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 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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– conventional 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 commonly financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan secured by a property in need of repairs is really seldom funded by banks; so the borrower will use a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term lending will be provided by a private lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a particular period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. Hence, there’s an enormous need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly 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?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is determined by 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?
Hard money lenders in Port Charlotte charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by an attorney, an application fee, assessment fee from an unbiased appraiser, and financing processing 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 your loan proceeds?
Yes 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 in the actual loan proceeds.
Will there be a pre-payment penalty with hard money loans?
For instance, with a 6 pre-payment fee, if the borrower should happen 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 modest return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee will be issued.
How quickly can a typical hard money loan 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 appraisal, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an assessment required,?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing a repair & flip or rehabilitation project, 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 uses this as a guide in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers expertise in performing or managing real estate 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 will even require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security rather than the credit score.
If you are in need of 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 info.
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