Hard Money Loan Florida Vanderbilt Beach
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short-term alternative (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 a person pick 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund one 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 commonly funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Yet, a private lender will be pleased to lend on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, banks quite infrequently fund a loan guaranteed by a property in need of repairs; therefore the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with conventional financing. 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 will provide temporary lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan 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. Consequently even quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal financing. Hence, there’s a huge importance of private lenders who look more at 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 funding decision mostly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of variables such as: (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 associated with asset based lending?
Most hard money lenders in Vanderbilt Beach charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, an application fee, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward terms without all of the rubbish fees that are hidden
Can the loan fees be paid from your loan proceeds?
Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from your actual loan proceeds.
Will there be a pre payment 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 requirement is put in place so the lender receives a modest return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre payment penalty will be issued.
How quickly 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 appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an evaluation needed?
Yes, hard money loans typically demand an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing a repair & flip or rehabilitation project, what will the hard money lender require?
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 resources for rehab purposes. Nothing ever goes as intended when performing a rehab; thus 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 will even require a credit report and income statement 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 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 information.
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