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Hard Money Loan Florida Saint Petersburg
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are normally for 15–20 year durations, hard money loans are used as a temporary option (1–3 years commonly) 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 choose 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 more economical traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single 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 Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. As an example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks before it can be used; consequently the borrower uses a hard money lender then, and rehabilitate and to buy the property 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. Nevertheless, a private lender will provide temporary financing to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a certain period of time. (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. Consequently traditional banks for normal lending consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. So, there’s a huge importance of private lenders who look 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 mostly 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 on looking at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 Petersburg charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, appraisal fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward conditions without all of the junk fees that are hidden
Can the loan fees be paid from the loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan earnings.
Will there be a prepayment penalty with hard money loans?
Ordinarily Saint Petersburg hard money loans have a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a modest return for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment penalty will be issued.
How quickly can a typical hard money loan 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 assessment, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When using is an evaluation required?
Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehab 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 extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will want to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. 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 chiefly on the asset value of the collateral and never 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 info.
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