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Hard Money Loan Florida Tampa
What’s hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying collateralized asset. Traditional banks and lenders focus mainly 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 security for the loan. Where traditional loans are usually for 15–20 year terms, 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 traditional 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 cheaper conventional funding: (1) Quick Funding– conventional 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 finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; consequently the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender will provide short-term funding to the borrower to purchase the property and lease it up. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal lending. Thus, there’s an enormous need for private lenders who look at 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 chiefly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. The rate by the lender is determined by looking at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 involved with asset based lending?
Most hard money lenders in Tampa charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward conditions without all the crap 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 (besides the application fee) are paid from the actual loan earnings.
Is there a pre payment penalty with hard money loans?
Usually Tampa hard money loans have a 3–6 month minimum interest condition. 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 requirement is put in place so that the lender receives at least a little yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, then no pre payment penalty 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 evaluation, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing a repair & flip or rehab job, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral and not 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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