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 primarily on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term option (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person choose a hard money loan (asset–based loan) over a conventional 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 economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used as an example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks; hence the borrower will use a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary lending will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional lending consistently turn down quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Thus, there’s an enormous 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. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by an attorney, assessment fee from an unbiased appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden crap fees and charges an incredibly low origination fee of merely 2%*
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 of the fees (other than the application fee) are paid from your actual loan earnings.
Will there be a pre payment fee with hard money loans?
Typically Saint Petersburg hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives at least a little return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, then no pre-payment penalty 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 evaluation, title commitment). The typical deal takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When using is an appraisal needed,?
Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an unaffiliated appraisal is ordered by us on the subject property.
When finishing a repair & flip or rehabilitation project, what’ll 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 timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; therefore the lender will need to see the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and not 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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