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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 chiefly on the worth 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 primarily on the worth of the asset being used as security for the loan. Where conventional loans are normally for 15–20 year terms, hard money loans are used as a short term alternative (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 traditional 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 cheaper conventional financing: (1) Quick Funding– conventional banks take the absolute minimum of 45 days to fund an individual family residential loan, any where between 60–90 days to fund a commercial loan, and over 120 days to fund a development loan. Whereas, a hard money loan is typically funded within 7–14 days. (2) Property Demands Work– because of the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties needing repair. Nevertheless, an exclusive lender will be happy to give on a property that either lacks cash flow or demands physical developments so long as the borrower has enough “skin in the game” (equity). As an example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks before it can be used; consequently the borrower will use a hard money lender to buy and rehabilitate the property, and then settlement the hard money loan with conventional 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 to stabilization. Once the property is stabilized for a specific period of time, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based entirely on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Hence quality borrowers like physicians, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for normal funding. Therefore, there is an enormous importance of private lenders who look more at the value of the underlying asset compared to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our capital decision mainly on the LTV (loan to value). We generally look for a 50% – 65% LTV in our loans. What that means is we normally lend 65% out of the appraised value of the property to the borrower.
What are the interest rates involved in hard money loans?
Hard money loan rates typically range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of factors such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property state 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 associated with asset based lending?
Hard money lenders in Fort Lauderdale charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for document preparation will then charge by an attorney, an application fee, assessment fee from an unaffiliated appraiser, and financing processing fee. Capital Funding Financial charges an extremely low origination fee of merely 2%* and offers straight forward provisions without each of the hidden crap fees
Can the loan fees be paid from your loan proceeds?
Yes there’s a big enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid in the actual loan earnings.
Will there be a pre payment 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 requirement is put in place in order for the lender receives a little return for the time, hassle and apportionment of its funds to your borrower. If the borrower repays the loan 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 days when given a complete loan package (credit report, income documentation, independent assessment, 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 using is an appraisal needed?
Yes, hard money loans generally demand comparative sales analysis, broker price opinion, or an appraisal. At Capital Funding Financial, we order an independent appraisal.
When finishing flip or rehabilitation job & a fix, what will 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 timeline and worksheet. The lender will use this as helpful information in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; so the lender will need to find the borrowers expertise in managing or performing property repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such listed repairs. The lender may also require a credit report and income statement from the borrower to show that the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mostly on the asset value of the collateral rather than 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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