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 chiefly on the value of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short term alternative (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 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 more affordable conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund a single 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 commonly funded within 7–14 days. (2) Property Needs Work– due to the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, a private lender will be pleased to give on a property that either lacks cash flow or needs physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, a loan secured by a property in need of repairs is really seldom funded by banks; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property payoff the hard money loan with traditional financing. 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 lending 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 particular period of time, a commercial lender will refinance the hard money loan with normal funding. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently even quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are consistently turned down by traditional banks for normal financing. Thus, 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. We generally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent on taking a look at a combination 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 involved in asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, an application fee, evaluation fee from an independent appraiser, and financing processing fee. Capital Funding Financial offers straight forward terms without all the rubbish fees that are concealed and costs a very low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

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

Will there be a pre-payment fee with hard money loans?

Normally hard money lenders in Miami Florida implement a 3–6 month minimum interest condition. For instance, 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 requirement is put in place so that the 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 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 bargain takes about one to two weeks to fund as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when using?

Yes, hard money loans generally need an assessment, broker price opinion, or comparative sales analysis. On the subject property, we order an independent appraisal at Capital Funding Financial.

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

Besides the apparent 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will want to see the borrowers expertise in performing or managing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will even require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus largely on the asset value of the collateral and never the credit score.

If you’re 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.

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