How to choose the best hard money lender in Sebastian

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Hard Money Lender FL Sebastian

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit 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 traditional loans are generally for 15–20 year terms, hard money loans are used as a short term option (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would a person pick 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 cheaper conventional financing: (1) Quick Funding– conventional banks take the absolute 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 commonly funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or needs physical developments so long as the borrower has enough “skin in the game” (equity). As an example, banks very infrequently fund a loan guaranteed 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 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. Nonetheless, an exclusive lender will provide short-term funding to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific period of time, the hard money loan will be refinanced by a commercial lender with traditional lending. (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 quality borrowers such as physicians, lawyers, and attorneys who’ve high incomes but also have a lot 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 compared to the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. 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 location, (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?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, an application fee, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all of the rubbish fees that are hidden and costs an extremely low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as 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 your actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Typically hard money lenders in Sebastian Florida implement a 3–6 month minimum interest requirement. For instance, 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 the lender receives a modest return for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no prepayment penalty will be issued.

How fast can a typical hard money loan 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 appraisal, title commitment). The typical price 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 required when employing?

Yes, hard money loans usually demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.

When finishing flip or rehab project & a repair, what will the hard money lender require?

Besides the apparent 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 capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers expertise in performing or managing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral and never the credit score.

If you are 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.