Hard Money Loan Florida Port Saint Lucie
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a temporary alternative (1–3 years normally) 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 choose 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 financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund 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 typically financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; hence the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff 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, temporary financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with normal funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal funding consistently turn down even quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt. Therefore, there is an enormous requirement for private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 upon looking at a combination of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?
Hard money lenders in Port Saint Lucie charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, an application fee, assessment fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without each of the rubbish fees that are concealed and costs an incredibly 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 the fees (apart from the application fee) are paid from your actual loan proceeds.
Is there a pre payment penalty with hard money loans?
Ordinarily Port Saint Lucie hard money loans have a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment penalty, 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 return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty will be issued.
How fast 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 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.
Is an assessment required when applying?
Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing flip or rehabilitation project & a repair, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; so the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require income statement and a credit report from the borrower to show 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 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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