How to choose the best hard money lender in Fort Lauderdale

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Hard Money Lender FL Fort Lauderdale

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth 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 durations, hard money loans are used as a temporary solution (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 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 conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance 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– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, an exclusive lender will be pleased to lend on a property that either lacks cash flow or needs physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, banks really rarely finance a loan secured by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender will give you short term funding to the borrower to buy the property and lease it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal lending. (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 normal funding consistently turn down even quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there’s an enormous requirement for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 dependent on looking at a mix of variables 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 associated with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, financing processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward conditions without all the crap fees that are concealed

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.

Can there be a prepayment penalty with hard money loans?

Usually hard money lenders in Fort Lauderdale Florida implement a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so that the lender receives a small yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower 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’re 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 appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an appraisal needed?

Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an appraisal. We are a Fort Lauderdale hard money lender who orders an appraisal that is independent on the subject property.

When completing a repair & flip or rehabilitation project, 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 timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehab; so 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. The lender may also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly on the asset value of the collateral and never the credit score.

If you’re looking for 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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