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 asset that is collateralized 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 mainly on the worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years normally) 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 pick 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 financing or a hard money loan over a cheaper traditional funding: (1) Quick Funding– traditional banks take a 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 generally financed within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a personal lender will be pleased to loan on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). By way of example, banks really rarely finance a loan guaranteed by a property in need of repairs before it can be used; so the borrower uses a hard money lender settlement the hard money loan with traditional funding, and then to purchase and rehabilitate 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, a personal lender provides short term financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time period, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal lending. Consequently, there’s an enormous importance of private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors for example: (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 involved in asset based lending?
Most hard money lenders in Tampa charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward conditions without each of the concealed junk fees
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 each of the fees (besides the application fee) are paid from the actual loan earnings.
Is there a pre payment penalty with hard money loans?
Normally Tampa hard money loans have a 3–6 month minimum interest condition. For instance, with a 6 pre-payment fee, 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 so your 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 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 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 using is an evaluation needed,?
Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will want 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 may also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and not the credit score.
If you’re in need of 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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