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 primarily on the value 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 being used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, 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 dwelling.

Why exactly would a person choose a hard money loan (asset–based loan) over a conventional loan provided 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 more economical traditional 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 fund a development loan. Whereas, a hard money loan is generally financed within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used as an example, banks quite rarely finance a loan guaranteed by a property in need of repairs; therefore the borrower will use a hard money lender then, and to purchase and rehabilitate the property payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, a private lender provides short-term lending to the borrower to buy 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 certain time frame. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are consistently turned down by traditional banks for normal funding. So, there’s an enormous need for private lenders who look the value of the underlying asset in comparison with 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 normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 generally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix 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 involved in asset based lending?

Hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by an attorney, a loan processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the rubbish fees that are hidden and costs a very low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid from your actual loan earnings.

Is there a pre-payment 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 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 at least a modest return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after half a year, subsequently no pre payment penalty 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 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 assessment needed when using?

Yes, hard money loans usually require comparative sales analysis, broker price opinion, or an appraisal. On the subject property, an unaffiliated appraisal is ordered by us at Capital Funding Financial.

When finishing flip or rehab job & a fix, what’ll 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 will use this as helpful tips in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehab; hence the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. 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. Nevertheless, hard money lenders focus mainly on the asset value of the collateral and never 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 information.

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