How to choose the best hard money lender in Orlando

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Hard Money Lender FL Orlando

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the value of the asset that is collateralized that is underlying. Traditional banks and lenders focus mainly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as security for the loan. Where traditional loans are generally for 15–20 year terms, 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 home.

Why exactly would someone choose a hard money loan (asset–based loan) over a traditional 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 traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund a single 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 commonly funded within 7–14 days. (2) Property Needs Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Yet, a private lender will be pleased to lend on a property that either lacks cash flow or necessitates physical advancements so long as the borrower has enough “skin in the game” (equity). For example, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; therefore the borrower uses a hard money lender then, and rehabilitate and to buy the property payoff the hard money loan with normal financing. 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 give you short term lending to the borrower to purchase the property and lease it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender 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 traditional banks for normal lending consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Thus, there is a huge need for private lenders who look at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 taking a look at a mix 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 financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will subsequently charge by a lawyer, evaluation fee from a completely independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the hidden rubbish fees and charges an incredibly low origination fee of only 2%*

Can the loan fees be paid from the loan proceeds?

Yes 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 in the actual loan earnings.

Will there be a pre payment penalty with hard money loans?

By way of example, with a 6 pre payment penalty, 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 so your lender receives a little 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 pre-payment fee will be issued.

How fast 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 evaluation, 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.

When implementing is an evaluation required,?

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

When completing flip or rehab project & a fix, what will the hard money lender require?

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 will use this as helpful tips in releasing capital for rehab goals. Nothing ever goes as planned when performing a rehabilitation; consequently the lender will need to find the borrowers experience in performing or managing real estate 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 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’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 information.