Hard Money Loan Florida Vero Beach
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying asset that is collateralized. 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 worth of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (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 choose 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 financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance an individual 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 typically funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks quite infrequently finance a loan guaranteed by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then settlement 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. Nevertheless, an exclusive lender will provide short-term lending to the borrower to buy the property and rent 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 traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional funding. Consequently, there is certainly a huge importance of private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily lend out 65% 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 dependent upon looking 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 involved in asset based lending?
Most hard money lenders in Vero Beach 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, appraisal fee from an unbiased appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward provisions without all the hidden trash 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 (apart from the application fee) are paid in the actual loan earnings.
Can there be a pre payment fee with hard money loans?
Normally Vero Beach hard money loans have a 3–6 month minimum interest requirement. By way of example, with a 6 pre-payment fee, if the borrower should happen 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 at least a small return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an appraisal required,?
Yes, hard money loans usually need comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When completing flip or rehab project & a fix, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehab; consequently the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security rather than 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 information.
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