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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 primarily on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, hard money loans are used as a temporary option (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would a person 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 a single 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 funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, a personal lender will be pleased to lend on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). By way of example, banks quite seldom 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 rehabilitate and to buy the property, and then payoff the hard money loan with traditional funding. 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 financing will be provided by a personal lender to the borrower to buy the property and rent it up. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with conventional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal funding consistently turn down quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there is a huge requirement for private lenders who look the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. We normally 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 on looking at a combination of factors 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” (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?
Hard money lenders in West Palm Beach charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, an application fee, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward conditions without all the junk fees that are concealed
Can the loan fees be paid from your loan proceeds?
Yes there’s a large enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from the actual loan earnings.
Will there be a prepayment penalty with hard money loans?
For example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no prepayment fee will be issued.
How quickly 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 assessment, 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 assessment needed when employing?
Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When finishing a fix & flip or rehab job, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to see the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such repairs that are listed 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 show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral rather than the credit score.
If you’re looking for 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 advice.
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