How to choose the best hard money lender in Fort Lauderdale

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Hard Money Lender FL Fort Lauderdale

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as security for the loan traditional banks and lenders focus primarily 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 temporary solution (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 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 more economical traditional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund just one 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 funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan secured by a property in need of repairs is very infrequently funded by banks before it can be used; consequently the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, an exclusive lender will give you temporary funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is certain, the hard money loan will be refinanced by a commercial lender with conventional funding. (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. Hence traditional banks for conventional financing consistently turn down quality borrowers such as doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Therefore, there’s a huge requirement for private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 dependent on taking a look at a combination of factors 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” (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 involved with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, evaluation fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all of the concealed rubbish fees and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from the actual loan proceeds.

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

For instance, with a 6 pre-payment 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 in order for the lender receives a modest yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after six months, subsequently no prepayment 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 price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when applying?

Yes, hard money loans typically need comparative sales analysis, broker price opinion, or an assessment. We order an independent appraisal on the subject property.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehabilitation goals. Nothing ever goes as planned when performing a rehab; therefore the lender will need to see the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender may also require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral rather than 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 information.

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