Hard Money Lender FL Deerfield Beach
What is hard money loan?
A hard money loan is a loan given to a borrower from a lender based mainly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where traditional loans are generally for 15–20 year periods, 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 someone pick a hard money loan (asset–based loan) over a traditional 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 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 funded 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. Nevertheless, a personal lender will be happy to give on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is really seldom funded by banks; so the borrower will use a hard money lender settlement the hard money loan with conventional lending, and then to buy 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. However, an exclusive lender provides short term financing to the borrower to purchase the property and lease it up. Once the property is stabilized for a particular time frame, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers including physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for conventional financing. Hence, there’s an enormous need for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 looking at a combination 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 involved with 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, appraisal fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial offers straight forward terms without all of the concealed junk fees and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from the loan proceeds?
Yes, so long as there is a huge 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 pre-payment penalty with hard money loans?
Normally hard money lenders in Deerfield 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 extra months of interest due. This condition is put in place so that the lender receives a little yield for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre-payment penalty will be issued.
How quickly can a hard money loan that is typical 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 deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an appraisal needed,?
Yes, hard money loans typically require an assessment, broker price opinion, or comparative sales analysis. We order an independent appraisal.
When completing a fix & flip or rehab job, what’ll the hard money lender require?
Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers expertise in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security 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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Deerfield Beach Florida Hard Money Lender