How to choose the best hard money lender in Canal Point

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Hard Money Lender FL Canal Point

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a short-term alternative (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would a person pick 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 funding or a hard money loan over a cheaper traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one 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 commonly financed within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; therefore the borrower uses a hard money lender to buy and rehabilitate the property, and then 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, temporary financing will be provided by a personal lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Consequently, there’s an enormous requirement for private lenders who look the value of the underlying asset compared to 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 generally 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?

Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of variables 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” (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 associated with asset based lending?

Most hard money lenders 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 an attorney, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden junk fees and charges an incredibly low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan earnings.

Will there be a prepayment fee with hard money loans?

By way of example, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so your lender receives at least a small return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no prepayment fee will be issued.

How fast 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 few days when given a complete loan package (credit report, income documentation, independent evaluation, title commitment). The typical bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an assessment required when implementing?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.

When completing a repair & flip or rehab project, what will 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 will use this as a guide in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers expertise in managing or performing property 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 will also require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security and not 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 info.

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