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 mainly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary alternative (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 someone 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, a loan secured by a property in need of repairs is quite seldom funded by banks before it can be used; consequently the borrower uses a hard money lender then, and to buy and rehabilitate 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. However, short-term lending will be provided by an exclusive lender to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a particular period of time. (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 conventional lending consistently turn down even quality borrowers for example physicians, lawyers, and attorneys who’ve high incomes but also have a lot of debt. Therefore, there is certainly an enormous requirement for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables 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” (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 financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by a lawyer, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward provisions without all of the hidden junk fees and charges an extremely low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes there is a large 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 proceeds.

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

Usually hard money lenders in Boynton Beach Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a little return for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no pre-payment fee 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 assessment, title commitment). The typical price takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an appraisal needed?

Yes, hard money loans usually demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we are a Boynton Beach hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehab goals. Nothing ever goes as planned when performing a rehabilitation; hence the lender will want to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral and not 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 information.

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