Hard Money Loan Florida Seffner
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short term 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 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 affordable traditional funding: (1) Quick Funding– conventional banks take a 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 fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; therefore the borrower will use a hard money lender settlement the hard money loan with traditional financing, 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, short-term lending will be provided by an exclusive lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a specific time period. (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. Thus quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. Thus, there’s an enormous importance of private lenders who look the value of the underlying asset in comparison to 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 typically 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 dependent on taking a look at a combination of variables 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 associated with asset based lending?
Most hard money lenders in Seffner charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, a loan processing fee, evaluation fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the concealed rubbish fees and costs 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 big enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan earnings.
Is there a pre-payment penalty with hard money loans?
Generally Seffner hard money loans have a 3–6 month minimum interest requirement. 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 condition 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 a borrower. If the loan is repaid by the borrower 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 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 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an appraisal needed when applying?
Yes, hard money loans typically need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral rather than 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 advice.
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