How to choose the best hard money lender in Fort Lauderdale

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Hard Money Lender FL Fort Lauderdale

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the value of the collateralized asset that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a temporary alternative (1–3 years typically) 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 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 financing or a hard money loan over a more affordable traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund 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 typically funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be happy to loan on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). For example, a loan guaranteed 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 settlement the hard money loan with normal funding, and then rehabilitate and to buy the property. 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 lease it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with conventional lending. (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 for example physicians, lawyers, and attorneys who have high incomes but also have lots of debt are consistently turned down by traditional banks for normal lending. Thus, there is an enormous importance of private lenders who look 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 funding decision chiefly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a mix of variables 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” (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 file preparation by a lawyer, an application fee, assessment fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without all of the hidden trash fees and charges a very low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a large enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid from the actual loan proceeds.

Is there a pre payment fee with hard money loans?

Generally hard money lenders in Fort Lauderdale Florida implement a 3–6 month minimum interest condition. 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 extra months of interest due. This requirement is put in place so your lender receives at least a small return for the time, hassle and apportionment of its funds to your borrower. If the loan is repaid by the borrower after six months, subsequently no pre payment penalty will be issued.

How fast 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 evaluation, title commitment). The typical price 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 appraisal required?

Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an appraisal. We are a Fort Lauderdale hard money lender who orders an appraisal that is independent on the subject property.

When completing flip or rehabilitation project & a repair, 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 will use this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. 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. Nonetheless, hard money lenders focus mostly on the asset value of the security rather than the credit score.

If you are 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 advice.

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