How to choose the best hard money lender in Boynton Beach

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Hard Money Lender FL Boynton Beach

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as security for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short-term option (1–3 years commonly) 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 traditional 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 funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just one 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 typically 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. Before it can be used by way of example, banks really seldom fund a loan secured by a property in need of repairs; so the borrower uses a hard money lender payoff the hard money loan with traditional financing, 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. Nevertheless, short-term lending will be provided by an exclusive lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional financing once the property is stabilized for a specific time frame. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. So even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional lending. Thus, there’s an enormous importance of 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 normally 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?

The rate by the lender is determined by looking at a combination of variables 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 in 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 subsequently charge by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all of the crap fees that are concealed and charges an extremely 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 (apart from the application fee) are paid from your actual loan earnings.

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

Normally hard money lenders in Boynton Beach Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a modest yield for the time, hassle and apportionment of its funds to a 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 to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation required when implementing?

Yes, hard money loans typically demand broker price opinion, an assessment, or comparative sales analysis. We are a Boynton Beach hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; so 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 will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security 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 info.