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 a borrower from a lender based mostly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are usually for 15–20 year terms, hard money loans are used as a temporary option (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 choose 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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual 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 financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, a loan secured by a property in need of repairs is very seldom funded by banks before it can be used; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary financing will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a certain time frame, a commercial lender will refinance the hard money loan with traditional financing. (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. So even quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. Consequently, there is a huge need for private lenders who look at the value of the underlying asset in comparison with the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 determined by taking a look at a combination of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by an attorney, an application fee, appraisal fee from an independent appraiser, and a loan processing fee. Capital Funding Financial costs an extremely low origination fee of merely 2%* and offers straight forward conditions without all the hidden trash fees

Can the loan fees be paid from your loan proceeds?

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

Is there a pre payment fee with hard money loans?

Usually hard money lenders in Fort Lauderdale Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 prepayment 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 a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no prepayment fee 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 evaluation, title commitment). The typical price takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an assessment required?

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

When completing flip or rehab job & a fix, what will the hard money lender require?

Besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender may also require income statement and a credit report in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the collateral and never 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 information.