How to choose the best hard money lender in Satellite Beach

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Hard Money Lender FL Satellite Beach

What is hard money loan?

A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the underlying collateralized asset. Traditional banks and lenders focus chiefly on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the value of the asset used as collateral for the loan. Where traditional loans are generally for 15–20 year terms, hard money loans are used as a temporary solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.

Why exactly would a person choose a hard money loan (asset–based loan) over a conventional 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 economical traditional financing: (1) Quick Funding– traditional banks take a minimum of 45 days to finance just 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 generally financed within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. For instance, banks very infrequently fund a loan secured by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender settlement the hard money loan with conventional funding, and then rehabilitate and to buy the property. 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 a personal lender to the borrower to buy the property and rent it up to stabilization. The hard money loan will be refinanced by a commercial lender with conventional lending once the property is stabilized for a certain time period. (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 financing consistently turn down even quality borrowers such as physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt. Consequently, there is certainly an enormous 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. We generally look for a 50% – 65% LTV in our loans. What that means is we usually 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 dependent on taking a look at a mix 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” (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 associated with asset based lending?

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

Can the loan fees be paid from the loan proceeds?

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

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

For example, 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 requirement is put in place so your lender receives a modest return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after six months, subsequently no pre-payment 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 appraisal, title commitment). The typical deal takes about 1 to 2 weeks to fund as an independent appraisal and title report need to be run on the property.

When applying is an evaluation needed?

Yes, hard money loans generally need comparative sales analysis, broker price opinion, or an assessment. On the subject property, an independent appraisal is ordered by us at Capital Funding Financial.

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

Besides the obvious 35–40% equity cushion, the lender will want to see the range of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing resources for rehabilitation goals. Nothing ever goes as intended when performing a rehabilitation; consequently the lender will want to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws for such repairs that are listed and require an inspection. The lender will also require a credit report and income statement in the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus primarily on the asset value of the security and not the credit score.

If you are in need of 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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