How to choose the best hard money lender in Port Orange

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Hard Money Lender FL Port Orange

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value 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 generally 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 home.

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 more affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance 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 funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks very seldom 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 payoff the hard money loan with conventional funding, and then rehabilitate and to buy 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 lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional lending once the property is stabilized for a specific time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers for example doctors, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. Consequently, there is certainly an enormous requirement for private lenders who look the value of the underlying asset when compared with 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 generally 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors 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” (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, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without each of the hidden crap fees and costs 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 huge enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid in the actual loan earnings.

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

By way of 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 condition is put in place so the lender receives a small return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no prepayment penalty will be issued.

How quickly 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 appraisal, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When using is an appraisal required?

Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

When completing flip or rehab project & a fix, 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 worksheet and timeline. The lender will use this as a guide in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to see the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral rather than 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 information.