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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 chiefly on the value of the collateralized asset 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 primarily on the value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short-term solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone choose a hard money loan (asset–based loan) over a conventional loan offered 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 affordable conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks quite rarely fund a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender then, and to purchase and rehabilitate the property payoff 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. However, an exclusive lender will give you short-term financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a time period that is particular, 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 heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers for example doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there’s a huge need for private lenders who look at the value of the underlying asset compared 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 usually lend 65% out 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 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” (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 Tampa charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, evaluation fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward conditions without each of the hidden crap fees and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid from the actual loan proceeds.
Will there be a pre-payment penalty with hard money loans?
For instance, with a 6 pre-payment penalty, 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 the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee 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 assessment, 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 appraisal required,?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When completing a fix & flip or rehab project, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to see the borrowers expertise in managing or performing property repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the collateral and not 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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