How to choose the best hard money lender in Key Biscayne

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Hard Money Lender FL Key Biscayne

What is hard money loan?

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

Why exactly would someone 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 conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For example, banks quite rarely fund a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender provides short term funding to the borrower to buy 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 funding. (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. Thus traditional banks for conventional lending consistently turn down even quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt. Hence, there’s an enormous need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 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?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward provisions without all the hidden trash fees

Can the loan fees be paid from the loan proceeds?

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

Will there be a pre-payment penalty with hard money loans?

Typically hard money lenders in Key Biscayne Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives a small yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then no pre-payment fee will be issued.

How fast 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 evaluation, title commitment). The typical price 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 required,?

Yes, hard money loans typically require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we are a Key Biscayne hard money lender who orders an appraisal that is independent on the subject property.

When finishing a fix & flip or rehabilitation project, what’ll the hard money lender require?

Well besides the obvious 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; so the lender will want to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely 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 information.