How to choose the best hard money lender in Hollywood

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Hard Money Lender FL Hollywood

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily 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 mainly on the value of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (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 pick 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 traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund a single family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. However, a private lender will be pleased to lend on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). For instance, banks very infrequently finance a loan guaranteed by a property in need of repairs before it can be used; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then settlement the hard money loan with normal financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, a personal lender will give you short term lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional funding. (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 conventional funding consistently turn down even quality borrowers for example physicians, lawyers, and solicitors who have high incomes but also have a lot of debt. Thus, there is a huge requirement for private lenders who look the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. 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 determined by looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and place, (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 in 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 a lawyer, a loan processing fee, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of just 2%* and offers straight forward provisions without all of the trash fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (other than the application fee) are paid in the actual loan earnings.

Will there be a pre-payment penalty with hard money loans?

Usually hard money lenders in Hollywood Florida implement a 3–6 month minimum interest condition. By way of 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 that the lender receives at least a little yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment fee 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 1 to 2 weeks to finance 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 need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

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

Well besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehab; hence the lender will want to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the collateral and never the credit score.

If you are 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 info.

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