How to choose the best hard money lender in Havana

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Hard Money Lender FL Havana

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being 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 alternative (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 a person 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 conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance a single 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 Demands Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be pleased to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). For instance, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; consequently the borrower uses a hard money lender settlement the hard money loan with conventional financing, and then to purchase and rehabilitate the property. 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 financing will be provided by a personal lender to the borrower to purchase the property and rent it up. The hard money loan will be refinanced by a commercial lender with conventional funding once the property is stabilized for a particular period of time. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence even quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for conventional lending. Consequently, there is certainly an enormous importance of private lenders who look the value of the underlying asset compared to 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 usually 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 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 state and location, (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 financing origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by an attorney, a loan processing fee, assessment fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all of the trash fees that are hidden and costs a very low origination fee of just 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a prepayment fee with hard money loans?

Typically hard money lenders in Havana Florida implement a 3–6 month minimum interest condition. For instance, 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 the lender receives a little return for the time, hassle and apportionment of its funds to a borrower. If the borrower repays the loan after half a year, then no pre payment penalty will be issued.

How fast 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 appraisal, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an assessment needed,?

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

When completing a fix & flip or rehab project, what’ll 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 timeline and worksheet. The lender will use this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender may also require a credit report and income statement from the borrower showing the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security and never 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.

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