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 your borrower from a lender based primarily on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a temporary option (1–3 years normally) 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 traditional 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 an individual 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 funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks really infrequently fund a loan secured by a property in need of repairs before it can be used; hence the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, temporary funding will be provided by a personal lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is certain, the hard money loan will be refinanced by a commercial lender with traditional lending. (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. Hence traditional banks for normal funding consistently turn down even quality borrowers such as doctors, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Consequently, there is certainly an enormous importance of private lenders who look more at the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We typically 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?

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 place, (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 associated with asset based lending?

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

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid from your actual loan proceeds.

Is there a pre-payment fee with hard money loans?

Generally hard money lenders in Miami Florida implement a 3–6 month minimum interest condition. For example, with a 6 prepayment fee, 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 your lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after six months, then no prepayment fee 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 price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an appraisal required,?

Yes, hard money loans typically demand broker price opinion, an appraisal, or comparative sales analysis. At Capital Funding Financial, we order an independent appraisal on the subject property.

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

Besides the apparent 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 information in releasing funds for rehab purposes. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to see the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws for such listed repairs and require an inspection to be made after each draw is complete. The lender will also 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 primarily on the asset value of the collateral and never the credit score.

If you’re in need of 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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