Hard Money Loan Florida Tampa
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based primarily on the value of the asset that is collateralized that is underlying. 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 worth of the asset used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term option (1–3 years commonly) 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 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 funding or a hard money loan over a more economical traditional financing: (1) Quick Funding– conventional banks take the absolute 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 fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks quite rarely fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then 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. Nonetheless, a private lender will provide temporary financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with normal lending. (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 lending consistently turn down quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Consequently, there is a huge importance of private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. We usually 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?
The rate by the lender is dependent on looking at a mix of variables 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 involved with asset based lending?
Hard money lenders in Tampa charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward terms without each of the trash fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a huge 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 earnings.
Is there a pre-payment fee with hard money loans?
For example, with a 6 prepayment 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 in order for the lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre-payment fee will be issued.
How quickly 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 appraisal, title commitment). The typical bargain takes about one or two weeks to fund 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 require broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to find the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender will even require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security rather than the credit score.
If you’re looking for 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 info.
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