How to choose the best hard money lender in Boynton Beach

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Hard Money Lender FL Boynton Beach

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years typically) 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 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 funding or a hard money loan over a more affordable traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund 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 very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). For example, banks very seldom fund a loan secured by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender will give you temporary financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, the hard money loan will be refinanced by a commercial lender with normal lending. (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. Thus traditional banks for normal lending consistently turn down quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Thus, there’s a huge importance of private lenders who look at the value of the underlying asset in comparison with 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 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 dependent upon looking 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” (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 associated with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, an application fee, appraisal fee from an unaffiliated appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without each of the hidden rubbish fees and charges a very low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

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

Is there a pre-payment fee with hard money loans?

For example, with a 6 prepayment fee, if the borrower were 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 return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment penalty will be issued.

How quickly can a hard money loan that is typical 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 assessment, title commitment). The typical bargain takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when implementing?

Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an independent appraisal.

When finishing flip or rehab job & a repair, what’ll the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to see the borrowers expertise 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 may also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral rather than the credit score.

If you are in need of 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 information.