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 mostly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus primarily on the credit and income 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 traditional loans are usually for 15–20 year terms, 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 someone choose 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 affordable conventional funding: (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 finance a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Demands Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for example, a loan guaranteed by a property in need of repairs is quite infrequently funded by banks; so the borrower uses a hard money lender payoff the hard money loan with normal 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, an exclusive lender provides short-term lending to the borrower to purchase the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with traditional financing once the property is stabilized for a specific 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 traditional banks for normal financing consistently turn down even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. So, there’s an enormous importance of private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 looking at a mix of variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. The lender will subsequently charge various fees for file preparation by a lawyer, a loan processing fee, evaluation fee from an unaffiliated appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without all the trash fees that are hidden and costs an incredibly low origination fee of only 2%*

Can the loan fees be paid from your loan proceeds?

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

Can there be a prepayment penalty with hard money loans?

For instance, 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 your lender receives a little 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 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 bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal needed,?

Yes, hard money loans generally demand broker price opinion, an assessment, or comparative sales analysis. We order an unaffiliated appraisal on the subject property.

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

Besides the apparent 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing funds for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to see the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the collateral 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 info.

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