Hard Money Loan Florida Tallahassee
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 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 collateral 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 option (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 choose a hard money loan (asset–based loan) over a traditional 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 funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one 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 Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks very infrequently fund a loan guaranteed by a property in need of repairs; so the borrower uses a hard money lender payoff 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. Nevertheless, a private lender will give you temporary funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a particular time period. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional financing consistently turn down quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have lots of debt. So, there’s a huge requirement for private lenders who look more at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. 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 factors for example: (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 associated with asset based lending?
Most hard money lenders in Tallahassee charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, appraisal fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward terms without all the rubbish fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes 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 proceeds.
Will there be a prepayment fee with hard money loans?
Usually Tallahassee hard money loans have a 3–6 month minimum interest condition. For example, 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 condition is put in place so the lender receives at least a small return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no pre-payment 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 assessment, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When completing a repair & 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 extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; thus the lender will need to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely 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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