Hard Money Loan Florida Trenton
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 primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (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 provided 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– conventional banks take the absolute minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be happy to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). As an example, banks really seldom fund a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term funding 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 specific time frame, the hard money loan will be refinanced by a commercial lender with normal funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal funding. Consequently, there’s a huge importance of private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we typically 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 looking 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 involved in asset based lending?
Most hard money lenders in Trenton charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the concealed trash fees and costs an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a huge enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from your actual loan proceeds.
Is there a prepayment penalty with hard money loans?
For example, with a 6 prepayment penalty, 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 that the lender receives at least a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no pre-payment penalty will be issued.
How fast can a typical hard money loan 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 one or two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when using?
Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an assessment. At Capital Funding Financial, we order an independent appraisal.
When finishing flip or rehab project & a repair, what will the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will even require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the security and not the credit score.
If you are in need of 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.
If you’re trying to find a means to earn over 8.5% APR without gambling in the stock market… invest in mortgage notes with Capital Funding Financial. Click here Note Investing for more advice.
Capital Funding Financial Mortgage Notes:
Article source: http://capitalfundingfinancial.com