Hard Money Loan in Florida Orlando
What is Hard Money Loan?
A hard money is simply a loan that a lender gives to a borrower depending on the collateralized, underlying worth of the asset. The hard money lenders usually focus on the income and credit of the borrower while hard money lenders (or asset-based lenders) majorly concentrate on the asset value used as collateral for the loan. While the terms of traditional loans are in the range of 15 to 30 years, hard money loans are used as a short-term alternative, with a period of 1-3 years. This hard money loan may be used to stabilize an industrial, office, retail, commercial, single family, and multi-family residential home or as a bridge to obtain a rehab.
Why pick a hard money (or asset-based) loan over a conventional loan provided by a bank with comparatively lower rates?
There are a plethora of reasons why a borrower would be more interested in choosing a hard money loan or private financing over conventional financing, which is apparently more affordable.
To fund just one family residential loan, traditional banks take a minimum of 45 days. Moreover, they take anywhere between 60 to 90 days for funding a commercial loan, and more than 120 days to finance a development loan. However, a hard money loan is funded in no more than 7 to 14 days.
Property Needs Work
Due to the underwriting guidelines of the traditional banks, which are largely conservative, majority will not lend on properties looking for repair. However, a personal lender wouldn’t be disappointed to loan an a property that either demands physical progress or lack cash flow as long as the borrower has enough equity or skin in the game. For instance, often banks never fund a loan assured by a property needing repairs before it may be used. Therefore, the borrower makes use of a hard money lender settlement, the hard money loan with normal funding, to rehabilitate and purchase the property. Another instance would be a commercial property without any tenant where a bank wouldn’t loan until the property is leased. Nevertheless, a personal lender provides short-term financing to the borrower for purchasing a property, subsequently renting it up to stabilization. A commercial lender will then refinance the hard money loan with conventional lending once the property achieves stabilization for a specific period of time.
Not Solely Based On Income or Credit
Conventional banks heavily depend on the previous income and credit score of the borrower, thereby identifying his ability to repay the debt. As a result, quality borrowers like solicitors, lawyers, and doctors have their normal financing turned down by conventional banks because these borrowers have high debt, though their income is quite good. Therefore, a need for private lenders become immense who takes into consideration the value of underlying asset, comparing with the loan amount versus the credit history of the borrower. Typically, we look for up to 75% LTV in our loans, meaning that we lend out usually 75% of the appraised property value to the borrower.
How Do Interest Rates Work in Hard Money Loans?
Generally, rates of hard money loan range from 10% to 15%. The rate by the money lender rely on considering a combination of variables, for instance, property location and state, income and credit score of borrower, amount of cash equity in the property of borrower, and loan to value ratio. At A to Z Capital Lending, the rates we offer are best when it comes to affordability.
What are the fees involved with asset-based lending?
In Orlando, usually a loan origination fee of 3-5% of the loan amount is charged by the hard money lenders. Other fees related to document preparation is obtained by the lawyer. Additionally, appraisal fee from an independent appraiser, application fee, and processing fee of financing is also charged. However, A to Z Capital Lending offers precise conditions without charging any unnecessary, hidden fees. The origination fee that we charge is also quite low.
Can loan proceeds be used to pay the loan fees?
Yes, if the equity cushion in the real estate is large enough. Majority of the times, every fees apart from the application fee is paid in the loan earnings.
Is there any chance of a Pre-Payment penalty with hard money loans?
Usually, hard money loans of Orlando have an interest condition within the range of 3 to 6 months. For example, with a prepayment fee of 6 months, if the loan is to be repaid by the borrower in 3 months, an interest will be due for the 3 additional months. This requirement is developed so that the hard money lenders in Orlando, Florida obtains a little return for all the funds allocation, hassle, and time he puts in. There would be no prepayment penalty if the borrower repays the loan after six months.
How quickly can a typical hard money loan close?
Being a direct hard money private lender at Orlando, A to Z Capital Lending have the capability to close loans with a matter of days when provided with a complete loan package, which comprise, title commitment, independent assessment, income documentation, and credit report. Usually, a deal takes no more than 2 weeks to fund as an independent appraisal, with the title report needing to be run on the property.
Is an evaluation required during implementation?
Yes. Often, hard money loans entail a comparative sales analysis, broker price opinion, and an assessment. At A to Z Capital Lending, we order an unaffiliated appraisal on the property under consideration.