How to choose the best hard money lender in Jacksonville

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Hard Money Lender FL Jacksonville

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mostly on the worth of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short-term option (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 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 cheaper traditional funding: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund an individual 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 typically financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks very seldom finance a loan secured by a property in need of repairs; hence the borrower will use a hard money lender then, and rehabilitate and to buy the property payoff 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. Yet, a personal lender provides short term financing to the borrower to buy the property and lease it up to stabilization. Once the property is stabilized for a time frame that is specific, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have lots of debt are turned down by traditional banks for normal funding. So, there’s an enormous importance of private lenders who look 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 capital decision mostly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 on taking a look at a mix of factors 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” (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?

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, an application fee, assessment fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial costs a very low origination fee of merely 2%* and offers straight forward provisions without each of the hidden trash fees

Can the loan fees be paid from your loan proceeds?

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

Is there a pre payment penalty with hard money loans?

Typically hard money lenders in Jacksonville Florida implement a 3–6 month minimum interest condition. For instance, with a 6 prepayment penalty, 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 a little yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no pre-payment penalty will be issued.

How quickly can a hard money loan that is typical 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 bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when implementing?

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

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

Besides the apparent 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis timeline and worksheet. The lender will use this as helpful tips in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; thus the lender will want to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection to be made after each draw is complete. The lender may also require a credit report and income statement in the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus largely on the asset value of the collateral and not the credit score.

If you’re looking for 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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