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Hard Money Loan Florida Sarasota
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 collateralized asset that is underlying. Traditional banks and lenders focus chiefly on income and the credit 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 generally for 15–20 year periods, hard money loans are used as a short-term option (1–3 years usually) 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 pick 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 affordable traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund an individual 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 financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, banks very seldom finance a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender settlement the hard money loan with conventional funding, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you temporary financing to the borrower to buy the property and rent it up. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with normal lending. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional financing. Thus, there is certainly a huge importance of 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 funding decision primarily on the LTV (loan to value). We typically 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix of variables such as: (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 associated with asset based lending?
Hard money lenders in Sarasota charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, assessment fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward conditions without all the hidden junk fees
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from the actual loan proceeds.
Is there a pre-payment fee with hard money loans?
For example, with a 6 prepayment 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 in order for the lender receives at least a little return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan 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’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 deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an evaluation needed?
Yes, hard money loans generally need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When completing a fix & flip or rehabilitation project, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will even require income statement and a credit report in the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security and not 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 information.
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