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 mostly on the worth of the asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as security for the loan. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years commonly) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would someone 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 funding or a hard money loan over a more economical conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to finance one 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 generally funded within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, a personal lender will be pleased to loan on a property that either lacks cash flow or demands physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used by way of example, banks really seldom fund a loan secured by a property in need of repairs; so the borrower uses a hard money lender payoff the hard money loan with conventional 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. However, short term funding will be provided by an exclusive lender to the borrower to purchase the property and rent it up. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for conventional lending consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who have high incomes but also have lots of debt. So, there’s an enormous need for private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We usually 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?

Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent upon 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 with 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, appraisal fee from an unbiased appraiser, and an application fee. Capital Funding Financial offers straight forward provisions without each of the trash fees that are hidden and charges an incredibly low origination fee of just 2%*

Can the loan fees be paid from the loan proceeds?

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

Is there a prepayment penalty with hard money loans?

For instance, with a 6 prepayment fee, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place in order for the lender receives at least a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no pre-payment fee 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 assessment, title commitment). The typical deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When using is an evaluation needed,?

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

When completing flip or rehabilitation job & a repair, 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 tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehab; so the lender will want to find the borrowers experience in performing or managing real estate 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 the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the collateral and not the credit score.

If you are 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 advice.