How to choose the best hard money lender in Punta Gorda

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Hard Money Lender FL Punta Gorda

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the value of the underlying asset that is collateralized. Traditional banks and lenders focus mainly on the credit and income of the borrower where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan. Where conventional loans are usually for 15–20 year durations, hard money loans are used as a temporary 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 dwelling.

Why exactly would a person pick 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– traditional banks take a minimum of 45 days to finance an individual 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 typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, a loan guaranteed by a property in need of repairs is very infrequently funded by banks before it can be used; therefore the borrower will use a hard money lender rehabilitate and to purchase the property, and then payoff the hard money loan with normal lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, temporary lending will be provided by an exclusive lender 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 particular, the hard money loan will be refinanced by a commercial lender with conventional financing. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So 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. Hence, there is certainly a huge importance of private lenders who look more 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 typically 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 determined by taking a look at a mix 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 with asset based lending?

Most hard money lenders charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by an attorney, a loan processing fee, evaluation fee from an unbiased appraiser, and an application fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward terms without each of the rubbish fees that are hidden

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a big 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.

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

Generally hard money lenders in Punta Gorda Florida implement a 3–6 month minimum interest prerequisite. For example, with a 6 pre payment fee, 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 in order for the lender receives at least a little return for the time, hassle and allocation of its funds to a borrower. If the loan is repaid by the borrower after half a year, then no prepayment fee 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 assessment, 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.

Is an assessment needed when using?

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

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

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 purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will want to see the borrowers experience in managing or performing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws. The lender will also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus largely on the asset value of the security and not 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.