Hard Money Loan Florida Tarpon Springs
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 underlying asset that is collateralized. 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 collateral for the loan. Where conventional loans are normally for 15–20 year durations, 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 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 more economical traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance an individual 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 commonly financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, banks quite infrequently finance a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with conventional lending. 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 an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for normal financing consistently turn down quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. Consequently, there is certainly a huge need for 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 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 usually range from 10% all the way up to 15%. The rate by the lender is dependent on 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 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 with asset based lending?
Most hard money lenders in Tarpon Springs charge financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, financing processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of merely 2%* and offers straight forward conditions without all the concealed trash fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan earnings.
Can there be a prepayment penalty with hard money loans?
Ordinarily Tarpon Springs hard money loans have a 3–6 month minimum interest prerequisite. For instance, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so the lender receives a small yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, 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 evaluation, title commitment). The typical deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal needed?
Yes, hard money loans generally need an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing flip or rehab project & a fix, 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 will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you are 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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