How to choose the best hard money lender in Vero Beach

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Hard Money Lender FL Vero Beach

What is hard money loan?

A hard money loan is a loan given to your 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 mostly on the credit and income of the borrower. Where traditional loans are normally for 15–20 year terms, hard money loans are used as a temporary alternative (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 funding or a hard money loan over a more economical conventional funding: (1) Quick Funding– conventional banks take a 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 really conservative underwriting guidelines, most will not lend on properties needing repair. For instance, banks very seldom finance a loan guaranteed by a property in need of repairs before it can be used; therefore the borrower uses a hard money lender rehabilitate and to buy the property, and then payoff 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, temporary lending will be provided by a private lender to the borrower to purchase the property and lease it up to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with normal lending. (3) Not based solely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. So quality borrowers like physicians, lawyers, and solicitors who’ve high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Consequently, there’s an enormous need for private lenders who look the value of the underlying asset compared 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 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 dependent on looking at a mix of variables such as: (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?

Hard money lenders charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for file preparation by a lawyer, appraisal fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial charges an extremely low origination fee of only 2%* and offers straight forward conditions without all of the hidden trash fees

Can the loan fees be paid from the loan proceeds?

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

Is there a pre-payment penalty with hard money loans?

By way of example, with a 6 pre payment penalty, if the borrower should happen to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so your lender receives a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment fee will be issued.

How fast can a hard money loan that is typical close?

At Capital Funding Financial, we are 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 bargain takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.

When implementing is an assessment needed,?

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

When finishing flip or rehab project & a fix, 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 timeline and worksheet. The lender will use this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as intended when performing a rehabilitation; thus the lender will want to see the borrowers experience in managing or performing property repairs. The lender require an inspection and will release funds in draws. The lender will even require a credit report and income statement from the borrower to exhibit the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and not the credit score.

If you’re 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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