How to choose the best hard money lender in Jacksonville

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Hard Money Lender FL Jacksonville

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value 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 conventional loans are generally for 15–20 year durations, hard money loans are used as a temporary alternative (1–3 years typically) 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 conventional 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 cheaper conventional funding: (1) Quick Funding– traditional banks take the absolute 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 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 needing repair. Nonetheless, a personal lender will be happy to loan on a property that either lacks cash flow or requires physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan guaranteed by a property in need of repairs is very seldom funded by banks; therefore the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term lending will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific time period. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence quality borrowers such as doctors, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for conventional funding. Thus, there’s an enormous need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we typically 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 upon taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, appraisal fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all of the hidden trash fees and costs an incredibly low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Generally hard money lenders in Jacksonville Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives a small yield for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after six months, then no prepayment 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 bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an assessment needed,?

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

When completing a repair & flip or rehab job, 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 worksheet and timeline. The lender will use this as helpful tips in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will need to find the borrowers experience in performing or managing real estate repairs. The lender will release funds in draws and require an inspection. The lender may also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security and not the credit score.

If you’re looking for 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.