How to choose the best hard money lender in Mary Esther

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Hard Money Lender FL Mary Esther

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value 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 worth of the asset used as security for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a short-term option (1–3 years commonly) 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 cheaper conventional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just 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 funded within 7–14 days. (2) Property Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to give on a property that either lacks cash flow or necessitates physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan secured by a property in need of repairs; therefore the borrower uses a hard money lender payoff the hard money loan with traditional lending, 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. Yet, short-term lending will be provided by a personal lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Consequently traditional banks for conventional lending consistently turn down quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. Hence, there is a huge need for private lenders who look the value of the underlying asset in comparison to 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 usually lend 65% out of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a combination of variables 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 involved with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by a lawyer, financing processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the junk fees that are concealed and charges a very low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

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

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

Typically hard money lenders in Mary Esther Florida implement a 3–6 month minimum interest condition. For example, with a 6 prepayment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a small return for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then no pre-payment penalty 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 assessment, title commitment). The typical bargain takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

Is an assessment needed when applying?

Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an appraisal. We are a Mary Esther hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; so the lender will need to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender will also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus mostly 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 information.

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