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 mainly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus primarily 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 security for the loan. Where conventional loans are generally for 15–20 year periods, 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 choose 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 more affordable conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to fund an individual 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 typically funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For example, banks quite seldom finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender payoff the hard money loan with conventional lending, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender will provide temporary funding to the borrower to buy the property and rent it up. Once the property is stabilized for a certain time frame, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based entirely on credit or income– Traditional banks rely greatly 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 like doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Hence, there’s an enormous need for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a combination of factors 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 associated with asset based lending?
Hard money lenders in Tampa charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by an attorney, an application fee, assessment fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward conditions without each of the junk fees that are concealed
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan earnings.
Will there be a pre-payment penalty with hard money loans?
Generally Tampa hard money loans have a 3–6 month minimum interest condition. By way of 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 in order for the lender receives a little yield 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 prepayment penalty will be issued.
How fast 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
Is an assessment required when implementing?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.
When completing flip or rehab project & a fix, what will the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to find the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. 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. Yet, hard money lenders focus mainly on the asset value of the collateral and never 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 advice.
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