How to choose the best hard money lender in Venice

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Hard Money Lender FL Venice

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based mainly on the value of the collateralized asset that is underlying. Traditional banks and lenders focus primarily on income and the credit of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset being used as collateral for the loan. Where traditional loans are usually for 15–20 year terms, hard money loans are used as a temporary solution (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 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 financing or a hard money loan over a cheaper conventional financing: (1) Quick Funding– conventional banks take the absolute 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 generally funded within 7–14 days. (2) Property Needs Work– because of the traditional bank‘s quite conservative underwriting guidelines, most will not lend on properties in need of repair. Before it can be used for instance, a loan secured by a property in need of repairs is very seldom funded by banks; therefore the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with normal funding. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, short-term funding will be provided by a personal lender to the borrower to purchase the property and lease it up. The hard money loan will be refinanced by a commercial lender with traditional funding once the property is stabilized for a particular period of time. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Thus even quality borrowers such as for instance physicians, lawyers, and solicitors who’ve high incomes but also have lots of debt are consistently turned down by traditional banks for normal financing. So, there’s an enormous importance of private lenders who look the value of the underlying asset compared to the amount of the loan versus the borrower’s credit history. We typically 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 determined by looking at a mix of factors 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 financing origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for file preparation by a lawyer, financing processing fee, appraisal fee from a completely independent appraiser, and an application fee. Capital Funding Financial charges an extremely low origination fee of just 2%* and offers straight forward provisions without all the junk fees that are hidden

Can the loan fees be paid from your loan proceeds?

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

Can there be a prepayment penalty with hard money loans?

By way of example, with a 6 prepayment fee, 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 in order for the lender receives at least a little yield for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment fee will be issued.

How quickly can a hard money loan that is typical 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.

Is an assessment required when applying?

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

When completing a repair & flip or rehabilitation job, what will 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 timeline and worksheet. The lender uses this as helpful tips in releasing resources for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; therefore the lender will want to find 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 may also require a credit report and income statement in the borrower to show the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security rather than the credit score.

If you are 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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