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Hard Money Loan Florida Fort Lauderdale
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 asset that is collateralized that is underlying. Traditional banks and lenders focus mostly 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 conventional loans are generally for 15–20 year periods, hard money loans are used as a short term option (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 someone choose 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 cheaper traditional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund just one family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to finance a development loan. Whereas, a hard money loan is generally funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. Before it can be used by way of example, a loan secured by a property in need of repairs is really seldom funded by banks; hence the borrower uses a hard money lender to purchase and rehabilitate the property, and then payoff the hard money loan with traditional 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 funding will be provided by an exclusive lender to the borrower to buy the property and rent it up. 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 traditional lending. (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. Hence traditional banks for conventional funding consistently turn down quality borrowers such as for instance doctors, lawyers, and attorneys who’ve high incomes but also have a lot of debt. So, there is a huge need for private lenders who look more at the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. We generally look for a 50% – 65% LTV in our loans. What that means is we typically 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 taking a look 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?
Most hard money lenders in Fort Lauderdale 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, a loan processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the hidden junk fees and charges an incredibly low origination fee of merely 2%*
Can the loan fees be paid from your loan proceeds?
Yes, so long as there is a large enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid from the actual loan earnings.
Is there a pre-payment penalty with hard money loans?
Generally Fort Lauderdale hard money loans have a 3–6 month minimum interest condition. 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 extra months of interest due. This requirement is put in place so that the lender receives at least a small return for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after half a year, subsequently no prepayment fee will be issued.
How fast 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 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 finance as an independent appraisal and title report need to be run on the property.
When employing is an assessment needed,?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.
When finishing a repair & flip or rehab project, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehab; so the lender will want to see the borrowers expertise in managing or performing real estate repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require income statement and a credit report in the borrower showing that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral and not 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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