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 collateralized asset that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where traditional loans are normally for 15–20 year periods, 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 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 traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund one 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 Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to loan on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan guaranteed by a property in need of repairs is very seldom funded by banks; consequently the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with conventional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short term financing will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a time frame that is particular, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for conventional lending consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. So, there is an enormous importance of 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 capital decision primarily on the LTV (loan to value). We typically 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?
The rate by the lender is determined by 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 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 associated with asset based lending?
Hard money lenders in Tampa charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, assessment fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward conditions without all the hidden crap fees
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan earnings.
Will there be a pre payment penalty with hard money loans?
Ordinarily Tampa hard money loans have a 3–6 month minimum interest prerequisite. For 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 your 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’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 assessment, 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 applying is an evaluation needed?
Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing a repair & flip or rehab project, what will the hard money lender require?
Well 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 will use this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; 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 to be made after each draw is complete. The lender may also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral rather than the credit score.
If you’re in need of 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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