Hard Money Loan Florida Winter Springs
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 collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan traditional banks and lenders focus mainly 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 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 a person pick a hard money loan (asset–based loan) over a conventional loan provided 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– conventional banks take a minimum of 45 days to fund a single 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 generally financed within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is quite infrequently funded by banks; hence the borrower will use a hard money lender to buy and rehabilitate the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short-term financing will be provided by a private lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with normal lending. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have lots of debt. So, there is an enormous requirement for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We generally 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?
Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?
Hard money lenders in Winter Springs charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, an application fee, assessment fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward conditions without all of the hidden rubbish fees
Can the loan fees be paid from the loan proceeds?
Yes, so long as there’s 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.
Will there be a prepayment penalty with hard money loans?
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 extra months of interest due. This condition is put in place so your lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no prepayment penalty will be issued.
How quickly can a hard money loan that is typical 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 bargain takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.
When implementing is an assessment needed?
Yes, hard money loans usually need 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 rehab job, what will the hard money lender require?
Well 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 uses this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers experience 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 a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral and never the credit score.
If you’re 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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