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 worth of the asset that is collateralized that is underlying. 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 used as security for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would someone choose 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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund 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 generally funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a personal lender will be pleased to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan secured by a property in need of repairs; therefore the borrower will use a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with normal funding. 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 give you short-term financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, the hard money loan will be refinanced by a commercial lender with normal financing. (3) Not based exclusively 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 conventional financing consistently turn down even quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Consequently, there’s a huge need for private lenders who look more at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we generally 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 taking a look at a mix 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 with asset based lending?
Hard money lenders in West Palm Beach charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, an application fee, assessment fee from an independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without all of the trash fees that are concealed and charges a very low origination fee of only 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.
Can there be a prepayment penalty with hard money loans?
Ordinarily West Palm Beach hard money loans have a 3–6 month minimum interest requirement. For 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 requirement is put in place so that the lender receives a modest 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 fee 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 evaluation, title commitment). The typical bargain 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 generally need comparative sales analysis, broker price opinion, or an assessment. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.
When finishing flip or rehabilitation project & a fix, what’ll the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to find the borrowers experience in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the security and not 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 info.
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