Hard Money Loan Florida Saint Augustine
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value 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 mainly on the value of the asset being used as collateral for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short-term alternative (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 a person pick 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 more affordable conventional funding: (1) Quick Funding– traditional banks take the absolute 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 commonly funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be happy to give on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). For instance, banks quite rarely fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender rehabilitate and to buy the property, and then 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, an exclusive lender will provide temporary lending to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional financing. Therefore, there is an enormous importance of private lenders who look at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 determined by taking a look at a combination of factors 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?
Most hard money lenders in Saint Augustine charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden rubbish fees and costs an incredibly low origination fee of just 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 the actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
Generally Saint Augustine hard money loans have a 3–6 month minimum interest condition. 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 in order for the lender receives at least a modest yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no prepayment fee will be issued.
How quickly 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 appraisal, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
Is an evaluation required when using?
Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an appraisal. We order an appraisal that is independent on the subject property.
When finishing a fix & flip or rehabilitation job, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need 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 rehabilitation goals. Nothing ever goes as planned when performing a rehab; therefore the lender will need to find the borrowers expertise in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral rather than 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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