Hard Money Loan Florida Port Richey
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying collateralized asset. 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 value of the asset used as security for the loan. Where traditional 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 home.
Why exactly would someone choose a hard money loan (asset–based loan) over a traditional 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 cheaper conventional financing: (1) Quick Funding– conventional banks take the absolute 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 finance a development loan. Whereas, a hard money loan is commonly 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 needing repair. Nonetheless, an exclusive lender will be happy to lend on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks very seldom fund a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide short term funding to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal funding consistently turn down quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Consequently, there is a huge importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan 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 normally 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 upon looking at a mix of factors 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” (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?
Most hard money lenders in Port Richey charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the concealed junk fees and costs an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan earnings.
Is there a prepayment fee with hard money loans?
Ordinarily Port Richey hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives at least a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, 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 bargain 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 using?
Yes, hard money loans generally need broker price opinion, an appraisal, 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 rehab job, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will need to see the borrowers expertise in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security rather than the credit score.
If you’re in need of 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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