How to choose the best hard money lender in Ormond Beach

[dollars key=”0″]

Hard Money Lender FL Ormond Beach

What’s hard money loan?

A hard money loan is a loan given to a borrower from a lender based chiefly on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mostly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset being used as collateral for the loan. Where conventional loans are normally for 15–20 year periods, hard money loans are used as a short-term alternative (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 offered 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 cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute 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 fund a development loan. Whereas, a hard money loan is commonly financed within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, an exclusive lender will be pleased to give on a property that either lacks cash flow or necessitates physical developments so long as the borrower has enough “skin in the game” (equity). Before it can be used as an example, a loan secured by a property in need of repairs is really seldom funded by banks; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, a private lender will provide temporary lending to the borrower to purchase the property and rent it up to stabilization. Once the property is stabilized for a particular time frame, the hard money loan will be refinanced by a commercial lender with traditional funding. (3) Not based entirely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. Hence traditional banks for normal financing consistently turn down even quality borrowers including physicians, lawyers, and attorneys who have high incomes but also have lots of debt. Thus, there is certainly a huge need for private lenders who look the value of the underlying asset in comparison to the amount of the loan versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mostly on the LTV (loan to value). We normally 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?

The rate by the lender is dependent on taking a look at a combination of factors such as: (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, an application fee, evaluation fee from an unbiased appraiser, and a loan processing fee. Capital Funding Financial costs an incredibly low origination fee of just 2%* and offers straight forward terms without all the crap fees that are concealed

Can the loan fees be paid from the loan proceeds?

Yes, so long as there’s a huge enough equity cushion in the real estate. Most of the time all of the fees (besides the application fee) are paid in the actual loan proceeds.

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

Normally hard money lenders in Ormond Beach Florida implement a 3–6 month minimum interest prerequisite. 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 extra months of interest due. This condition is put in place so your lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after half a year, subsequently no pre-payment fee will be issued.

How fast can a hard money loan that is typical 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 evaluation, title commitment). The typical price takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When employing is an appraisal needed,?

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

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing funds for rehabilitation goals. Nothing ever goes as intended when performing a rehab; consequently the lender will want to find 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 repairs that are listed. The lender will even require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus primarily on the asset value of the security and not the credit score.

If you are in need of 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.