How to choose the best hard money lender in Paisley

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Hard Money Lender FL Paisley

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as security for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year durations, 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 pick a hard money loan (asset–based loan) over a traditional 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 conventional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance one family residential loan, any where between 60–90 days to finance a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is commonly funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. For instance, a loan secured by a property in need of repairs is really seldom funded by banks before it can be used; consequently the borrower uses a hard money lender rehabilitate and to buy the property, and then settlement the hard money loan with conventional funding. 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 provides short-term funding to the borrower to buy the property and rent it up to stabilization. Once the property is stabilized for a specific time period, the hard money loan will be refinanced by a commercial lender with traditional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Hence traditional banks for normal funding consistently turn down even quality borrowers for example physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Consequently, there is certainly an enormous importance of private lenders who look at the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We normally look for a 50% – 65% LTV in our loans. What that means is we generally 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 upon looking at a combination 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” (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?

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

Can the loan fees be paid from your loan proceeds?

Yes there is a large enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.

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

Generally hard money lenders in Paisley Florida implement a 3–6 month minimum interest condition. For instance, with a 6 pre-payment fee, 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 modest yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan 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 appraisal, title commitment). The typical deal takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an assessment required when using?

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

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

Besides the apparent 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as a guide in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will need to see the borrowers expertise in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus mainly on the asset value of the security rather than the credit score.

If you’re 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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