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 your borrower from a lender based chiefly on the value of the underlying collateralized asset. 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 mostly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short-term alternative (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would someone choose 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 traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund 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 Needs Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, banks quite seldom fund a loan guaranteed by a property in need of repairs; so the borrower will use a hard money lender settlement the hard money loan with normal 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. Yet, short-term financing will be provided by an exclusive lender to the borrower to buy the property and lease it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for normal financing consistently turn down even quality borrowers such as doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there’s a huge need for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 dependent upon taking a look at a combination of factors for example: (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 involved with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the trash fees that are hidden and charges a very low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as 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 in the actual loan earnings.

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

Typically hard money lenders in Miami Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 pre payment 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 a modest return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee will be issued.

How quickly 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 assessment, title commitment). The typical bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an evaluation required,?

Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal on the subject property.

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see 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 will even require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the collateral rather than 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.