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 a borrower from a lender based mostly on the worth of the underlying collateralized asset. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where traditional 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 home.

Why exactly would someone choose a hard money loan (asset–based loan) over a conventional 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 economical traditional financing: (1) Quick Funding– traditional banks take the absolute 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 financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with traditional financing. 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 temporary funding to the borrower to buy the property and lease it up. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with normal financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for normal funding consistently turn down even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there is certainly a huge importance of private lenders who look more at the value of the underlying asset when compared with 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 typically look for a 50% – 65% LTV in our loans. What that means is we normally lend out 65% 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 dependent upon taking a look at a mix of variables for example: (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 involved with asset based lending?

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, evaluation fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward terms without each of the hidden rubbish fees and costs a very low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

Yes there is a large 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 proceeds.

Will there be a pre payment fee with hard money loans?

For example, 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 requirement is put in place so your lender receives a small return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after half a year, then no pre payment penalty will be issued.

How quickly can a typical hard money loan 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 assessment, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment needed when using?

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

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

Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. 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 chiefly on the asset value of the security rather than 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 info.

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