How to choose the best hard money lender in Cocoa Beach

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Hard Money Lender FL Cocoa Beach

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 collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a short-term 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 dwelling.

Why exactly would a person choose 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 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 finance a development loan. Whereas, a hard money loan is typically financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan secured by a property in need of repairs is very rarely funded by banks before it can be used; consequently the borrower uses a hard money lender settlement the hard money loan with normal funding, and then to purchase and rehabilitate the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender provides short-term financing to the borrower to buy the property and rent it up. Once the property is stabilized for a time frame that is specific, 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 greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional funding. So, there is a huge need for private lenders who look more at the value of the underlying asset in comparison 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 normally 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?

Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of variables 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 associated with asset based lending?

Most 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 document preparation by a lawyer, a loan processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the junk fees that are concealed and costs a very low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from your actual loan earnings.

Can there be a prepayment fee with hard money loans?

For instance, with a 6 pre-payment fee, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This requirement is put in place so the lender receives at least a modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, then 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 evaluation, title commitment). The typical price takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an assessment required when implementing?

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

When completing flip or rehabilitation project & a fix, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws 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 to show the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral rather than the credit score.

If you’re 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 advice.

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