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Hard Money Loan Florida Saint Petersburg
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mainly on the value of the asset that is collateralized that is underlying. 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 mostly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year periods, hard money loans are used as a short-term 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 a person 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 traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary lending will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a certain time period, a commercial lender will refinance the hard money loan with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for normal financing consistently turn down even quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have lots of debt. So, there is certainly a huge need for private lenders who look the value of the underlying asset in comparison to 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 65% out 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 factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 with asset based lending?
Hard money lenders in Saint Petersburg charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, appraisal fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the junk fees that are concealed and charges an extremely low origination fee of merely 2%*
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 all the fees (besides the application fee) are paid from the actual loan earnings.
Will there be a pre payment fee with hard money loans?
Usually Saint Petersburg hard money loans have a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment penalty, 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 in order for the lender receives at least a little return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, 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 assessment, title commitment). The typical bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed?
Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will want to see the borrowers experience in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report from the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and never the credit score.
If you’re in need of 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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