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 a borrower from a lender based mostly on the worth of the asset that is collateralized 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 value of the asset being used as collateral for the loan. Where conventional loans are generally for 15–20 year terms, hard money loans are used as a short-term option (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would someone pick a hard money loan (asset–based loan) over a conventional loan offered 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 conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance an individual 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 really conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan secured by a property in need of repairs is quite infrequently funded by banks before it can be used; therefore the borrower will use a hard money lender rehabilitate and to buy 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. Yet, temporary lending will be provided by a personal lender to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a particular time period, 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, previous income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Consequently, there is certainly an enormous requirement for private lenders who look at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We generally 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 determined by taking a look at a combination of factors such as: (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 in asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for document preparation will then charge by a lawyer, assessment fee from an independent appraiser, financing processing fee, and an application fee. Capital Funding Financial costs an incredibly low origination fee of merely 2%* and offers straight forward terms without all the concealed trash fees

Can the loan fees be paid from your loan proceeds?

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

Is there a prepayment penalty with hard money loans?

Normally hard money lenders in Boynton Beach Florida implement a 3–6 month minimum interest requirement. By way of example, with a 6 pre-payment penalty, 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 allocation of its funds to your borrower. If the borrower repays the loan 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 appraisal, 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.

When employing is an assessment required?

Yes, hard money loans usually demand comparative sales analysis, broker price opinion, or an appraisal. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus chiefly on the asset value of the collateral and not the credit score.

If you’re looking for 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 info.

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