How to choose the best hard money lender in Fort Mc Coy

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Hard Money Lender FL Fort Mc Coy

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying asset that is collateralized. 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 value of the asset being used as security for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary alternative (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.

Why exactly would a person 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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund 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 Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks really rarely finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower will use a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term funding will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time frame, a commercial lender will refinance the hard money loan with conventional funding. (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. Consequently traditional banks for normal funding consistently turn down even quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. So, there is certainly an enormous need for private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly 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 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 involved with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, financing processing fee, assessment fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the junk fees that are concealed and costs an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

Yes there’s a big enough equity cushion in the real estate. Most of the time all the fees (besides the application fee) are paid in the actual loan earnings.

Is there a prepayment penalty with hard money loans?

Normally hard money lenders in Fort Mc Coy Florida implement a 3–6 month minimum interest condition. For example, with a 6 pre-payment fee, 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 your lender receives at least a modest return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, subsequently 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 evaluation, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an assessment needed when employing?

Yes, hard money loans usually need broker price opinion, an assessment, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will need to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection. The lender will also require a credit report and income statement from the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the security rather than the credit score.

If you’re 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 information.

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