Hard Money Loan Florida Sneads
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the collateralized asset 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 terms, hard money loans are used as a temporary alternative (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 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 financing or a hard money loan over a more economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund a single 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 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. For instance, banks quite seldom fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender payoff the hard money loan with normal financing, and then to purchase 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. Nevertheless, temporary funding will be provided by an exclusive lender to the borrower to buy the property and rent it up. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with traditional financing. (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 even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for conventional lending. Hence, there is certainly a huge requirement for private lenders who look 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 primarily on the LTV (loan to value). We usually 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?
Hard money loan rates normally range from 10% all the way up to 15%. The rate by the lender is determined by looking 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” (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 in asset based lending?
Most hard money lenders in Sneads charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, a loan processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the trash fees that are concealed and costs a very low origination fee of only 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a large enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan proceeds.
Is there a prepayment penalty with hard money loans?
For instance, 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 so your lender receives a little yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment penalty 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 assessment, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed?
Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing a fix & flip or rehab project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender may also require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly 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 info.
Click here Note Investing for more information.
Capital Funding Financial Mortgage Notes:
Article source: http://capitalfundingfinancial.com