Hard Money Loan Florida Sarasota
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly 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 security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, 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 someone pick 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 traditional financing: (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 finance 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 Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used by way of example, banks quite seldom finance a loan guaranteed by a property in need of repairs; hence the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender will provide short term financing to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a particular time frame. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. So quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Consequently, there is certainly a huge importance of private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We usually 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?
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 mix of variables for example: (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 associated with asset based lending?
Hard money lenders in Sarasota 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 unbiased appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all of the rubbish fees that are hidden and charges an incredibly low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is 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 proceeds.
Will there be a prepayment fee with hard money loans?
Normally Sarasota hard money loans have a 3–6 month minimum interest prerequisite. For instance, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place in order for the lender receives at least a small return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after half a year, then no pre payment fee will be issued.
How fast 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 appraisal, 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 employing is an appraisal needed?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When finishing flip or rehabilitation project & a repair, what will 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 worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehab; so the lender will need 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 to be made after each draw is complete. The lender will also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly 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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