How to choose the best hard money lender in Palm Bay

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Hard Money Lender FL Palm Bay

What’s hard money loan?

A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying asset that is collateralized. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. 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 traditional 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 traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to finance 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 Requires Work– due to the conventional bank‘s quite conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used for instance, a loan secured by a property in need of repairs is really rarely funded by banks; consequently the borrower uses a hard money lender then, and to buy and rehabilitate the property settlement 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. Yet, an exclusive lender provides short term lending to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a particular period of time, a commercial lender will refinance the hard money loan with conventional financing. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, previous income, and ability to repay the debt. Consequently traditional banks for conventional financing consistently turn down quality borrowers such as doctors, lawyers, and attorneys who have high incomes but also have a lot of debt. Therefore, there is a huge need for private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of factors for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 with asset based lending?

Hard money lenders charge financing origination fee of 3% to 5% of the loan amount. Various fees for file preparation will subsequently charge by an attorney, a loan processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the hidden rubbish fees and charges an extremely low origination fee of merely 2%*

Can the loan fees be paid from the loan proceeds?

Yes, so long as 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 the actual loan earnings.

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

For example, with a 6 prepayment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This condition is put in place so that the lender receives at least a small 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 pre-payment penalty will be issued.

How quickly 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 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 applying is an assessment required?

Yes, hard money loans generally demand 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 a fix & flip or rehabilitation project, what’ll the hard money lender require?

Well besides the apparent 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as a guide in releasing capital for rehab goals. Nothing ever goes as intended when performing a rehabilitation; hence the lender will need to find the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the collateral rather than the credit score.

If you are 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 advice.