How to choose the best hard money lender in Miami

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Hard Money Lender FL Miami

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 underlying asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan. Where conventional loans are generally for 15–20 year periods, 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 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 affordable traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund just one 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 Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan guaranteed by a property in need of repairs is very rarely funded by banks; so the borrower uses a hard money lender payoff the hard money loan with conventional lending, and then to buy and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary lending will be provided by an exclusive lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with normal funding. (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 even quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. So, there is a huge requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. We normally 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?

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state and place, (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 with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, a loan processing fee, appraisal fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are hidden and costs an incredibly low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan proceeds.

Can there be a pre-payment fee with hard money loans?

Usually hard money lenders in Miami 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 additional 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, then no pre-payment fee will be issued.

How fast can a typical hard money loan 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 bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an assessment required?

Yes, hard money loans generally 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 job, what will 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 helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will need to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender may also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you’re looking for 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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