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 primarily on the worth of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus primarily on the worth of the asset used as collateral for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a short-term 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 dwelling.

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 financing or a hard money loan over a more affordable conventional funding: (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 typically funded within 7–14 days. (2) Property Requires Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nevertheless, a private lender will be pleased to loan on a property that either lacks cash flow or necessitates physical progress so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, banks quite rarely finance a loan secured by a property in need of repairs; hence the borrower will use a hard money lender payoff the hard money loan with conventional financing, 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, a private lender will give you short-term financing to the borrower to purchase the property and rent it up. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with traditional funding. (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. Consequently even quality borrowers including physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for normal lending. Thus, there is certainly a huge need for 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 funding decision primarily on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we usually 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 dependent on taking a look at a combination of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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?

Hard money lenders charge financing 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, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an incredibly low origination fee of only 2%* and offers straight forward terms without all the junk fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a huge 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 penalty with hard money loans?

For instance, with a 6 pre-payment fee, if the borrower should happen 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 a little 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 prepayment 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 appraisal, title commitment). The typical price 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 required when employing?

Yes, hard money loans usually demand an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an unaffiliated appraisal at Capital Funding Financial.

When completing a fix & flip or rehab 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 uses this as helpful information in releasing resources for rehab purposes. Nothing ever goes as intended when performing a rehab; consequently the lender will want to find the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws. The lender will also require income statement and a credit report from the borrower showing the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus chiefly on the asset value of the security 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 advice.

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