How to choose the best hard money lender in Miami

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Hard Money Lender FL Miami

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 asset that is collateralized that is underlying. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan. Where traditional loans are generally for 15–20 year durations, hard money loans are used as a temporary solution (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 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 traditional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance a single family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a personal lender will be happy to lend on a property that either lacks cash flow or demands physical progress so long as the borrower has enough “skin in the game” (equity). As an example, banks very rarely finance a loan secured by a property in need of repairs before it can be used; consequently the borrower uses a hard money lender settlement the hard money loan with normal 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. Nevertheless, short term financing will be provided by a private lender to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with normal lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus even quality borrowers like doctors, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal financing. So, there is certainly an enormous importance of private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). 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?

The rate by the lender is determined by taking a look at a combination 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” (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?

Most 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, a loan processing fee, appraisal fee from an independent appraiser, and an application fee. Capital Funding Financial costs an extremely low origination fee of only 2%* and offers straight forward provisions without all the junk fees that are hidden

Can the loan fees be paid from your loan proceeds?

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

Can there be a prepayment fee with hard money loans?

Ordinarily hard money lenders in Miami Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 pre-payment penalty, if the borrower were 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 yield for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment 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 appraisal, 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 required when using?

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

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

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 will use this as helpful tips in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehabilitation; thus the lender will need to see the borrowers expertise in performing or managing 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 will even require a credit report and income statement in the borrower showing that the borrower has the ability to repay the loan. Yet, hard money lenders focus mainly on the asset value of the collateral rather than the credit score.

If you are looking for 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 info.