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Hard Money Loan Florida Tallahassee
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short term 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 dwelling.
Why exactly would someone 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 cheaper traditional funding: (1) Quick Funding– traditional banks take the absolute 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 funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be pleased to give on a property that either lacks cash flow or needs physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks quite seldom finance a loan guaranteed by a property in need of repairs; consequently the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short-term lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with traditional funding. (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 traditional banks for conventional funding consistently turn down even quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Hence, there is certainly a huge requirement for private lenders who look the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We usually 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables 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” (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 involved in asset based lending?
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 a lawyer, financing processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the trash fees that are hidden and charges an incredibly low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes there’s a huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.
Is there a prepayment fee with hard money loans?
Usually Tallahassee hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment 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 a little yield for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee will be issued.
How fast can a typical hard money loan 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 price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when implementing?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing a fix & flip or rehab job, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers expertise in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the security and never 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 information.
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