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Hard Money Loan Florida Stuart
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a short term alternative (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 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 economical conventional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to finance 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 Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, a loan secured by a property in need of repairs is really rarely funded by banks; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender provides short term funding 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 conventional lending once the property is stabilized for a particular time frame. (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 physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there is a huge need for private lenders who look more at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is determined by 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?
Most hard money lenders in Stuart charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, assessment fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all the trash fees that are hidden and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a large 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.
Can there be a pre-payment fee with hard money loans?
For example, with a 6 pre-payment fee, 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 so that the lender receives at least a modest return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, then no pre payment fee will be issued.
How fast 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 price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment required when applying?
Yes, hard money loans generally need an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When finishing a repair & flip or rehabilitation project, 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 uses this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to find the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender will even require income statement and a credit report from 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 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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Links:
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