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Hard Money Loan Florida Winter Beach
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term solution (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 a person 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 cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 commonly financed within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, banks really infrequently fund a loan secured by a property in need of repairs; consequently the borrower uses a hard money lender settlement the hard money loan with normal financing, 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, a personal lender provides short-term funding to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time period. (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. Consequently traditional banks for normal lending consistently turn down even quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt. Thus, there is a huge importance of private lenders who look at the value of the underlying asset in comparison to 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 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 determined by taking a look at a mix of factors for example: (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 in asset based lending?
Hard money lenders in Winter Beach charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all the junk fees that are concealed and costs a very low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from the actual loan proceeds.
Is there a pre payment penalty with hard money loans?
For instance, 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 condition is put in place so your lender receives at least a small return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, then no pre-payment penalty will be issued.
How quickly can a typical hard money loan 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 deal takes about 1 to 2 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 generally 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 fix & flip or rehabilitation project, what’ll the hard money lender require?
Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; thus the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender may also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Yet, 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 advice.
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