Hard Money Loan Florida Port Orange
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the collateralized asset that is underlying. 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 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 a person pick a hard money loan (asset–based loan) over a conventional 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 cheaper traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund 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– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to loan on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). By way of example, banks quite seldom finance a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender settlement the hard money loan with traditional lending, 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. Nonetheless, temporary financing will be provided by a personal lender to the borrower to buy the property and rent it up. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. So traditional banks for normal lending consistently turn down quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. So, there is an enormous need for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We generally 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 usually range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination 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?
Hard money lenders in Port Orange charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward provisions without each of the trash fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes there is a big 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 prepayment penalty 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 requirement 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, then no pre-payment fee will be issued.
How fast 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 evaluation, title commitment). The typical deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
When applying is an assessment needed,?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing a fix & flip or rehabilitation project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender may also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral and never 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 info.
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