How to choose the best hard money lender in Fort Myers

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Hard Money Lender FL Fort Myers

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the worth 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 mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term option (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would a person choose 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 more affordable traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance just one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Needs Work– because of the conventional 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 seldom funded by banks; so the borrower will use a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, short term lending will be provided by a private lender to the borrower to buy the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional lending once the property is stabilized for a certain period of time. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for conventional lending. So, there’s an enormous requirement 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. We usually 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 such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 in asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for document preparation by a lawyer, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the crap fees that are concealed and charges a very low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a pre-payment fee with hard money loans?

Ordinarily hard money lenders in Fort Myers Florida implement a 3–6 month minimum interest condition. For instance, 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 condition is put in place so that the lender receives at least a small yield for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no pre-payment 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 deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed,?

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

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

Well besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; hence the lender will want to see the borrowers experience in managing or performing property 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 to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus mostly on the asset value of the collateral rather than the credit score.

If you are looking for 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 advice.