Hard Money Loan Florida West Palm Beach
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the value of the collateralized asset that is underlying. 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 traditional loans are usually for 15–20 year terms, hard money loans are used as a short term alternative (1–3 years normally) 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 financing or a hard money loan over a cheaper conventional financing: (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 finance a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. By way of example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; so the borrower will use a hard money lender settlement the hard money loan with conventional funding, 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. Nevertheless, short-term lending will be provided by a private lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. So, there is certainly a huge importance of private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. 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 variables for example: (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 involved in asset based lending?
Most hard money lenders in West Palm Beach charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by an attorney, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without each of the concealed junk fees and charges an extremely low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid in the actual loan proceeds.
Can there be a pre-payment penalty with hard money loans?
Typically West Palm Beach hard money loans have a 3–6 month minimum interest condition. For example, with a 6 pre payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives at least a little return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, then no pre-payment fee 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 deal 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 demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing a fix & flip or rehabilitation job, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful information in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to find the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender will also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security and not the credit score.
If you are looking for 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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