How to choose the best hard money lender in Ormond Beach

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Hard Money Lender FL Ormond Beach

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the underlying collateralized asset. 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 value of the asset being used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a short term alternative (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 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 cheaper conventional funding: (1) Quick Funding– conventional banks take a minimum of 45 days to finance an individual 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 generally financed within 7–14 days. (2) Property Needs Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. However, an exclusive lender will be happy to loan on a property that either lacks cash flow or requires physical improvements so long as the borrower has enough “skin in the game” (equity). Before it can be used for example, banks very rarely fund a loan secured by a property in need of repairs; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then payoff the hard money loan with traditional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Nonetheless, an exclusive lender will provide short term funding to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a period of time that is specific, the hard money loan will be refinanced by a commercial lender with traditional lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Thus quality borrowers like doctors, lawyers, and solicitors who’ve high incomes but also have lots of debt are turned down by traditional banks for conventional lending. Hence, there’s an enormous need for private lenders who look at the value of the underlying asset when compared with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision chiefly on the LTV (loan to value). We usually look for a 50% – 65% LTV in our loans. What that means is we ordinarily 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 determined by taking a look at a combination of factors for example: (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 involved in asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by an attorney, a loan processing fee, assessment fee from an unbiased appraiser, and an application fee. Capital Funding Financial costs a very low origination fee of just 2%* and offers straight forward provisions without all of the hidden trash fees

Can the loan fees be paid from your loan proceeds?

Yes, so long as there is a big enough equity cushion in the real estate. Most of the time all the fees (apart from the application fee) are paid from the actual loan proceeds.

Can there be a prepayment penalty with hard money loans?

Generally hard money lenders in Ormond Beach Florida implement a 3–6 month minimum interest condition. For example, with a 6 pre payment fee, if the borrower should happen 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 a little return for the time, hassle and apportionment of its funds to some borrower. If the loan is repaid by the borrower after six months, then no prepayment penalty 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 deal takes about a couple of weeks to finance as an independent appraisal and title report need to be run on the property.

When employing is an evaluation required,?

Yes, hard money loans typically require 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 rehab project & a fix, what’ll the hard money lender require?

Well besides the obvious 35–40% equity cushion, the lender will want to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as planned when performing a rehab; therefore the lender will want to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender may also require a credit report and income statement from the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the security and not 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 information.

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