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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 value of the underlying collateralized asset. Traditional banks and lenders focus mainly on income and the credit 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 traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary 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 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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan guaranteed by a property in need of repairs is quite seldom funded by banks before it can be used; consequently the borrower uses a hard money lender payoff the hard money loan with traditional financing, and then to buy 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. Yet, short-term financing will be provided by a personal lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with normal financing. (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. Consequently even quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Thus, there is certainly a huge importance of private lenders who look more at the value of the underlying asset when compared 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?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent upon taking a look at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 loan amount. Various fees for file preparation will then charge by a lawyer, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward provisions without each of the concealed junk fees
Can the loan fees be paid from the loan proceeds?
Yes there’s a large 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.
Can there be a prepayment fee with hard money loans?
Normally Tampa hard money loans have a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a modest return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, then no pre-payment fee will be issued.
How fast 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 a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation required when using?
Yes, hard money loans typically require comparative sales analysis, broker price opinion, or an assessment. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.
When completing a repair & flip or rehabilitation job, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips 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 for such repairs that are listed. The lender may also require income statement and a credit report from the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you’re 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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