How to choose the best hard money lender in Rockledge

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Hard Money Lender FL Rockledge

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as collateral for the loan traditional banks and lenders focus primarily on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, hard money loans are used as a short-term solution (1–3 years commonly) 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 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 traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund one 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 typically funded within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, banks really 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 conventional 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 will give you short term funding to the borrower to buy the property and rent it up. Once the property is stabilized for a time frame that is certain, the hard money loan will be refinanced by a commercial lender with conventional lending. (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. So traditional banks for normal lending consistently turn down even quality borrowers like physicians, lawyers, and attorneys who have high incomes but also have a lot of debt. Thus, there’s 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 funding decision mainly on the LTV (loan to value). We generally 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 variables for example: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 with asset based lending?

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

Can the loan fees be paid from the loan proceeds?

Yes there’s a large enough equity cushion in the real estate. Most of the time each of the fees (apart from the application fee) are paid from your actual loan proceeds.

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

By way of example, with a 6 pre payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so your lender receives at least a modest yield 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 deal takes about one or two weeks to fund as an independent appraisal and title report need to be run on the property.

When implementing is an appraisal required?

Yes, hard money loans generally require comparative sales analysis, broker price opinion, or an assessment. We order an unaffiliated appraisal.

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

Well besides the obvious 35–40% equity cushion, the lender will need to see the range of work described with a cost analysis worksheet and timeline. The lender uses this as a guide in releasing resources for rehab goals. Nothing ever goes as planned when performing a rehabilitation; so the lender will need to see the borrowers experience in performing or managing real estate repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will also require income statement and a credit report from the borrower to exhibit that the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mainly on the asset value of the security and never 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.

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