How to choose the best hard money lender in Fort Lauderdale

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Hard Money Lender FL Fort Lauderdale

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the value of the underlying collateralized asset. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term option (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 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 financing or a hard money loan over a cheaper traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to fund 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 traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan secured by a property in need of repairs is very rarely funded by banks; hence the borrower uses a hard money lender then, and rehabilitate and to purchase the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a personal lender will provide short-term financing to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a certain time period. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for conventional funding consistently turn down quality borrowers including doctors, lawyers, and attorneys who have high incomes but also have lots of debt. Hence, there is certainly an enormous need for private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 normally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of variables for example: (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 a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial offers straight forward terms without all the concealed rubbish fees and charges an extremely low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

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

Can there be a prepayment penalty with hard money loans?

For instance, with a 6 prepayment penalty, 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 that the lender receives at least a modest yield for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after six months, subsequently no pre-payment fee 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 appraisal, title commitment). The typical deal 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 needed?

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

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

Well besides the obvious 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 helpful information in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the collateral rather than the credit score.

If you are 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 info.