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 your borrower from a lender based mostly on the worth of the collateralized asset that is underlying. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term solution (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 someone pick a hard money loan (asset–based loan) over a traditional 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 conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one 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 financed within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used by way of example, banks very rarely fund a loan secured by a property in need of repairs; hence the borrower uses a hard money lender rehabilitate and to purchase the property, and then settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, temporary financing will be provided by a personal lender to the borrower to purchase the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a specific time period. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for conventional funding consistently turn down quality borrowers for example doctors, lawyers, and attorneys who’ve high incomes but also have lots of debt. Therefore, there is certainly a huge need for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. We usually 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a combination of factors 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 involved in asset based lending?

Most 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, financing processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial offers straight forward terms without all the rubbish fees that are concealed and costs an extremely low origination fee of merely 2%*

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 each of the fees (apart from the application fee) are paid in the actual loan proceeds.

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

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 additional months of interest due. This condition is put in place so the lender receives a modest yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, then no prepayment penalty will be issued.

How quickly 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 evaluation, title commitment). The typical deal takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an evaluation needed when employing?

Yes, hard money loans generally require an assessment, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Miami hard money lender who orders an appraisal that is independent on the subject property.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to find the borrowers expertise in managing or performing property 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 to exhibit the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security and not the credit score.

If you’re 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.

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