How to choose the best hard money lender in Daytona Beach

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Hard Money Lender FL Daytona Beach

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year periods, 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 home.

Why exactly would someone 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 generally financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, banks quite infrequently finance a loan secured by a property in need of repairs; so the borrower will use a hard money lender payoff the hard money loan with conventional financing, 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, temporary funding will be provided by an exclusive lender to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a particular time frame. (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. Hence even quality borrowers for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal funding. Therefore, there is certainly an enormous need for private lenders who look at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 dependent on looking at a combination of variables such as: (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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by a lawyer, appraisal fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward terms without all the junk fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes there’s a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from the actual loan earnings.

Will there be a prepayment penalty with hard money loans?

For example, with a 6 prepayment fee, 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 a small yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre-payment penalty 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 price takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when employing?

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

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

Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. 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. Yet, hard money lenders focus largely on the asset value of the security and never 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.

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