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Hard Money Loan Florida 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 collateralized asset. 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 worth of the asset used as security for the loan. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a short-term alternative (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 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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance an individual 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 typically financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, banks really seldom fund a loan secured by a property in need of repairs; consequently the borrower will use a hard money lender payoff 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, a personal lender will give you short-term lending to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a certain period of time, a commercial lender will refinance the hard money loan with conventional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Hence even quality borrowers for example doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional funding. Hence, there’s an enormous requirement for private lenders who look more at the value of the underlying asset when compared with the amount of the loan 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?
The rate by the lender is determined by 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 in asset based lending?
Hard money lenders in Miami charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently charge by a lawyer, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward terms without all the concealed crap fees
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time all the fees (other than the application fee) are paid from the actual loan proceeds.
Is there a pre-payment fee with hard money loans?
For example, with a 6 pre-payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives at least a modest return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre payment penalty 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.
Is an assessment needed when using?
Yes, hard money loans generally require broker price opinion, an appraisal, or comparative sales analysis. We order an independent appraisal on the subject property.
When finishing a repair & flip or rehabilitation job, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to see the borrowers expertise 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 even require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus primarily on the asset value of the security and not the credit score.
If you’re in need of 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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