Hard Money Loan Florida Saint Petersburg
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short term alternative (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 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 economical conventional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just 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 generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, an exclusive lender will be pleased to give on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). For instance, banks really seldom finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term financing will be provided by an exclusive lender to the borrower to buy the property and rent it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. Thus quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Thus, there is a huge need for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally lend out 65% 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 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?
Most hard money lenders in Saint Petersburg charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for document preparation by an attorney, an application fee, assessment fee from an independent appraiser, and a loan processing fee. Capital Funding Financial charges an incredibly low origination fee of merely 2%* and offers straight forward conditions without all the crap fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from your actual loan earnings.
Is there a pre payment penalty with hard money loans?
Ordinarily Saint Petersburg hard money loans have a 3–6 month minimum interest requirement. 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 condition is put in place so the lender receives at least a small yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no prepayment 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 evaluation, title commitment). The typical price takes about one or two weeks to finance 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 comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehab project & a fix, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to find the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security rather than the credit score.
If you’re 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 information.
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