How to choose the best hard money lender in Miami

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Hard Money Lender FL Miami

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security 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 short term option (1–3 years usually) 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– traditional banks take a 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 Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Nonetheless, a private lender will be happy to loan on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks quite rarely fund a loan guaranteed by a property in need of repairs; consequently the borrower uses a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with traditional funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide short term financing to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a particular time period. (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. Thus even quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal lending. So, there is certainly an enormous requirement for private lenders who look at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We usually look for a 50% – 65% LTV in our loans. What that means is we typically 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by taking a look at a mix 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” (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 associated with asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for document preparation will subsequently 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 merely 2%* and offers straight forward terms without all the crap fees that are hidden

Can the loan fees be paid from the loan proceeds?

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

Will there be a pre payment fee with hard money loans?

Normally hard money lenders in Miami Florida implement a 3–6 month minimum interest prerequisite. By way of example, with a 6 prepayment 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 that the lender receives a little return for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, subsequently no prepayment fee will be issued.

How quickly 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 one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal required when employing?

Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.

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

Well 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 resources for rehabilitation purposes. Nothing ever goes as intended when performing a rehab; therefore the lender will want to see the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report from the borrower showing that the borrower has the ability to repay the loan. However, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you are in need of 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.