How to choose the best hard money lender in Miami Beach

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Hard Money Lender FL Miami Beach

What’s 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 asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as security for the loan traditional banks and lenders focus mostly on the credit and income of the borrower. Where traditional loans are normally 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 home.

Why exactly would someone choose a hard money loan (asset–based loan) over a conventional 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 economical traditional funding: (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 typically financed within 7–14 days. (2) Property Demands Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for example, a loan secured by a property in need of repairs is very rarely funded by banks; hence the borrower uses a hard money lender settlement 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. Yet, a private lender will provide short term lending to the borrower to buy the property and lease it up. Once the property is stabilized for a specific time period, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So even quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for normal lending. So, there is certainly a huge requirement for private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mostly on the LTV (loan to value). We typically look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out 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 looking at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition and location, (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 associated with asset based lending?

Most hard money lenders charge a loan origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will subsequently charge by an attorney, appraisal fee from a completely independent appraiser, financing processing fee, and an application fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward terms without each of the trash fees that are concealed

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 penalty with hard money loans?

For example, with a 6 prepayment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives at least a small yield for the time, hassle and apportionment of its funds to a borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment fee will be issued.

How quickly 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 bargain takes about 1 to 2 weeks to finance as an independent appraisal and title report need to be run on the property.

When applying is an assessment required,?

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

When finishing flip or rehabilitation job & a fix, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis timeline and worksheet. The lender uses this as helpful information in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; therefore the lender will need to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. 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. Nevertheless, hard money lenders focus primarily on the asset value of the collateral rather than 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 info.

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