How to choose the best hard money lender in Trilby

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Hard Money Lender FL Trilby

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term 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 conventional 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– traditional banks take a minimum of 45 days to fund an individual 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 generally funded within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. However, a personal lender will be pleased to loan on a property that either lacks cash flow or requires physical developments so long as the borrower has enough “skin in the game” (equity). For instance, a loan guaranteed by a property in need of repairs is very seldom funded by banks before it can be used; consequently the borrower will use a hard money lender payoff the hard money loan with traditional funding, 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. Nevertheless, a private lender will provide short term lending to the borrower to purchase the property and lease it up. Once the property is stabilized for a certain period of time, the hard money loan will be refinanced by a commercial lender with conventional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for conventional financing. Consequently, there’s a huge 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 generally 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?

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 variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 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 file preparation will then charge by an attorney, an application fee, evaluation fee from a completely independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward conditions without all the hidden trash fees and costs a very low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s 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.

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

Normally hard money lenders in Trilby Florida implement a 3–6 month minimum interest requirement. For example, with a 6 pre-payment fee, 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 your lender receives a small yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no prepayment fee will be issued.

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

When applying is an evaluation required?

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

When completing a fix & flip or rehab project, what’ll 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 rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you are 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.

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