How to choose the best hard money lender in Deland

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Hard Money Lender FL Deland

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Traditional banks and lenders focus primarily on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years usually) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would a person pick 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 more affordable traditional financing: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to finance an individual 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 commonly funded within 7–14 days. (2) Property Demands 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 guaranteed by a property in need of repairs is really infrequently funded by banks before it can be used; consequently the borrower uses a hard money lender settlement the hard money loan with normal financing, 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. However, an exclusive lender will provide short term funding to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Thus, there is certainly a huge importance of private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally lend out 65% 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 combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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?

Most 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, assessment fee from a completely independent appraiser, and a loan processing fee. Capital Funding Financial offers straight forward conditions without all the rubbish fees that are hidden 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 big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from the actual loan earnings.

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

For instance, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives a small return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no pre-payment penalty 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 deal 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 applying?

Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.

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

Besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehab; thus the lender will need to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the security 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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