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Hard Money Loan Florida Hialeah
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based chiefly on the value of the underlying collateralized asset. 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 security for the loan. Where conventional loans are generally for 15–20 year durations, hard money loans are used as a short-term option (1–3 years typically) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential home.
Why exactly would someone 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 financing or a hard money loan over a more economical conventional funding: (1) Quick Funding– traditional banks take a minimum of 45 days to fund just 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 generally financed within 7–14 days. (2) Property Demands 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 by way of example, a loan guaranteed by a property in need of repairs is quite rarely funded by banks; hence the borrower uses a hard money lender then, and rehabilitate and to buy the property 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. Yet, temporary lending will be provided by a personal lender to the borrower to buy the property and rent it up. The hard money loan will be refinanced by a commercial lender with normal funding once the property is stabilized for a particular period of time. (3) Not based exclusively on credit or income– Traditional banks rely heavily on a borrower’s credit score, previous income, and ability to repay the debt. Consequently quality borrowers like doctors, lawyers, and solicitors who have high incomes but also have a lot of debt are turned down by traditional banks for conventional funding. Therefore, there’s an enormous requirement for 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 mostly on the LTV (loan to value). We usually 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?
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 place, (4) borrower’s “skin in the game” (sum 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?
Most hard money lenders in Hialeah 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, an application fee, appraisal fee from an independent appraiser, and financing processing fee. Capital Funding Financial charges a very low origination fee of just 2%* and offers straight forward provisions without all the concealed rubbish fees
Can the loan fees be paid from the 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 from your actual loan proceeds.
Will there be a pre-payment penalty with hard money loans?
For example, with a 6 pre payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so that the lender receives a small yield for the time, hassle and allocation of its funds to some borrower. If the borrower repays the loan after half a year, then no prepayment penalty will be issued.
How quickly 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 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 finance as an independent appraisal and title report need to be run on the property.
Is an evaluation needed when implementing?
Yes, hard money loans typically require an appraisal, broker price opinion, or comparative sales analysis. At Capital Funding Financial, we order an unaffiliated appraisal.
When completing flip or rehab job & a fix, what’ll the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender uses this as helpful tips in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehab; consequently the lender will want to find the borrowers experience in performing or managing property repairs. The lender will release funds in draws for such listed repairs and require an inspection. The lender will also require income statement and a credit report in the borrower to show that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the collateral and never the credit score.
If you’re looking for 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 information.
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