Hard Money Loan Florida Fort Lauderdale
What’s 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 the credit and income of the borrower where asset based lenders aka hard money lenders focus mainly on the worth of the asset used as collateral for the loan. Where traditional loans are usually for 15–20 year durations, 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 home.
Why exactly would a person choose 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 funding or a hard money loan over a more affordable traditional funding: (1) Quick Funding– traditional banks take the absolute minimum of 45 days to fund a single 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 typically funded within 7–14 days. (2) Property Requires Work– because of the conventional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. For example, banks very rarely fund a loan secured by a property in need of repairs before it can be used; hence the borrower will use a hard money lender rehabilitate and to purchase 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. Nonetheless, short-term financing will be provided by a personal lender to the borrower to buy the property and lease it up to stabilization. The hard money loan will be refinanced by a commercial lender with normal financing once the property is stabilized for a particular time frame. (3) Not based solely on credit or income– Traditional banks rely heavily on a borrower’s credit score, past income, and ability to repay the debt. So traditional banks for normal lending consistently turn down quality borrowers including doctors, lawyers, and solicitors who have high incomes but also have a lot of debt. Hence, there is certainly an enormous importance of private lenders who look the value of the underlying asset in comparison to the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision primarily on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we normally 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 upon 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 in Fort Lauderdale charge financing origination fee of 3% to 5% of the amount of the loan. The lender will then charge various fees for file preparation by an attorney, financing processing fee, assessment fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all the crap fees that are concealed and charges an extremely low origination fee of just 2%*
Can the loan fees be paid from your loan proceeds?
Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (other than the application fee) are paid from your actual loan earnings.
Can there be a pre payment penalty 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 condition is put in place so that the lender receives a little yield for the time, hassle and allocation of its funds to your borrower. If the loan is repaid by the borrower after six months, then 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 days when given a complete loan package (credit report, income documentation, independent assessment, title commitment). The typical deal takes about a couple of weeks to fund as an independent appraisal and title report need to be run on the property.
When employing is an assessment required?
Yes, hard money loans generally need broker price opinion, an assessment, or comparative sales analysis. We order an appraisal that is independent on the subject property.
When completing a repair & flip or rehab job, what will 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 timeline and worksheet. The lender uses this as helpful information in releasing funds for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; therefore the lender will want to find the borrowers expertise in performing or managing property repairs. The lender require an inspection and will release funds in draws for such listed repairs. The lender will even require a credit report and income statement in the borrower to exhibit the borrower has the ability to repay the loan. Nonetheless, hard money lenders focus mostly 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 info.
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