How to choose the best hard money lender in Naples

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Hard Money Lender FL Naples

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mainly 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 security for the loan. Where traditional loans are generally for 15–20 year periods, hard money loans are used as a short term solution (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would a person pick 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 affordable conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a private lender will be pleased to loan on a property that either lacks cash flow or requires physical advancements so long as the borrower has enough “skin in the game” (equity). By way of example, a loan guaranteed by a property in need of repairs is very rarely funded by banks before it can be used; hence the borrower uses a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nevertheless, a private lender will provide short-term financing to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a period of time that is particular, the hard money loan will be refinanced by a commercial lender with normal funding. (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. Consequently traditional banks for conventional lending consistently turn down quality borrowers such as for instance physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there’s a huge requirement 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. We usually 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 normally range from 10% all the way up to 15%. The rate by the lender is determined by looking at a mix of variables such as: (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?

Most 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, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward provisions without each of the hidden trash fees

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan earnings.

Can there be a prepayment penalty with hard money loans?

Ordinarily hard money lenders in Naples Florida implement a 3–6 month minimum interest requirement. By way of example, with a 6 prepayment penalty, 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 that the lender receives at least a modest return for the time, hassle and allocation of its funds to some borrower. If the loan is repaid by the borrower after six months, subsequently no prepayment penalty will be issued.

How fast can a typical hard money loan 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 assessment, title commitment). The typical price takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an evaluation required?

Yes, hard money loans typically demand an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we are a Naples hard money lender who orders an appraisal that is independent on the subject property.

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

Well besides the apparent 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing resources for rehab purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will need to see the borrowers experience 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 for such listed repairs. The lender may also require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus chiefly on the asset value of the security and never the credit score.

If you are looking for 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 information.