How to choose the best hard money lender in Lakeland

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Hard Money Lender FL Lakeland

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the worth of the underlying asset that is collateralized. 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 chiefly on the credit and income of the borrower. Where conventional loans are usually for 15–20 year periods, 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 dwelling.

Why exactly would a person pick a hard money loan (asset–based loan) over a conventional loan offered 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 a minimum of 45 days to fund one 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 financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be pleased to give 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, banks very infrequently finance a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender payoff the hard money loan with conventional funding, and then rehabilitate and to purchase the property. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary 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 lending once the property is stabilized for a particular period of time. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus quality borrowers like physicians, lawyers, and attorneys who’ve high incomes but also have lots of debt are turned down by traditional banks for normal financing. Therefore, there is certainly an enormous need for private lenders who look at the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We normally 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 dependent upon taking a look at a mix 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 associated with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, an application fee, appraisal fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial charges an incredibly low origination fee of just 2%* and offers straight forward provisions without all the trash fees that are concealed

Can the loan fees be paid from the loan proceeds?

Yes, so long as 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 from your actual loan earnings.

Will there be a prepayment penalty with hard money loans?

Typically hard money lenders in Lakeland Florida implement a 3–6 month minimum interest requirement. For instance, with a 6 pre payment fee, 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 the lender receives a small return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee will be issued.

How fast can a hard money loan that is typical 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 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.

Is an appraisal required when implementing?

Yes, hard money loans typically demand 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 finishing flip or rehab project & a fix, what’ll the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; thus the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will even require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mostly on the asset value of the collateral and not 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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