Hard Money Loan Florida Tallahassee
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. 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 normally for 15–20 year durations, hard money loans are used as a short-term solution (1–3 years typically) 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 conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 commonly funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Yet, an exclusive lender will be pleased to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks really rarely fund a loan secured by a property in need of repairs; therefore the borrower will use a hard money lender settlement the hard money loan with traditional funding, and then rehabilitate and to buy the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender will give you temporary funding to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there’s an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We generally 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 document preparation by an attorney, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without all the hidden crap fees and charges a very low origination fee of merely 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 (apart from the application fee) are paid in the actual loan earnings.
Is there a prepayment fee with hard money loans?
Usually Tallahassee hard money loans have a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment penalty, if the borrower should happen 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 little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre payment fee will be issued.
How fast can a typical hard money loan 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 evaluation, title commitment). The typical bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When employing is an evaluation needed,?
Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.
When completing flip or rehabilitation job & a repair, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender may also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security and never 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 advice.
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