Hard Money Loan Florida Tampa
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset 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 mostly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a short term solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single 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 generally financed 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. As an example, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; consequently the borrower uses a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with traditional financing. 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 provides short-term financing to the borrower to buy the property and rent it up. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. Consequently, there is certainly a huge requirement for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 usually range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix 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” (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?
Hard money lenders in Tampa charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by a lawyer, appraisal fee from an unaffiliated appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward conditions without all the trash fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid in the actual loan proceeds.
Will there be a prepayment penalty with hard money loans?
Usually Tampa hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives a small return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty 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 evaluation, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed,?
Yes, hard money loans typically demand comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an appraisal that is independent on the subject property.
When finishing a repair & flip or rehab project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral rather than 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 info.
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