Best hard money loan in Lake Worth

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Hard Money Loan Florida Lake Worth

What is hard money loan?

A hard money loan is a loan given to a borrower from a lender based primarily on the worth of the collateralized asset that is underlying. Where asset based lenders aka hard money lenders focus primarily on the value of the asset being used as security for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where conventional loans are generally for 15–20 year periods, 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 home.

Why exactly would someone 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 financing or a hard money loan over a cheaper conventional funding: (1) Quick Funding– traditional 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 commonly funded within 7–14 days. (2) Property Demands Work– due to the traditional bank‘s really conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a private lender will be pleased to loan on a property that either lacks cash flow or demands physical advancements so long as the borrower has enough “skin in the game” (equity). Before it can be used for instance, a loan secured by a property in need of repairs is very seldom funded by banks; consequently the borrower uses a hard money lender settlement the hard money loan with traditional financing, and then rehabilitate and to buy the property. 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 lending will be provided by an exclusive lender to the borrower to purchase the property and lease it up. Once the property is stabilized for a particular time period, a commercial lender will refinance the hard money loan with conventional funding. (3) Not based exclusively on credit or income– Traditional banks rely greatly on a borrower’s credit score, past income, and ability to repay the debt. Thus traditional banks for conventional financing consistently turn down even quality borrowers such as physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Therefore, there’s a huge importance of private lenders who look the value of the underlying asset in comparison with the loan amount versus the borrower’s credit history. At Capital Funding Financial, we base our funding decision mainly on the LTV (loan to value). We normally look for a 50% – 65% LTV in our loans. What that means is we typically lend out 65% of the appraised value of the property to the borrower.

What are the interest rates involved in hard money loans?

Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent upon looking at a mix of variables such as: (1) loan to value ratio, (2) borrower’s credit score & income, (3) the property condition 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 Lake Worth charge a loan origination fee of 3% to 5% of the loan amount. The lender will then charge various fees for document preparation by an attorney, appraisal fee from an unaffiliated appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without all of the junk fees that are hidden and costs an extremely low origination fee of merely 2%*

Can the loan fees be paid from your loan proceeds?

Yes, so long as there’s a large enough equity cushion in the real estate. Most of the time all of the fees (apart from the application fee) are paid in the actual loan proceeds.

Will there be a pre payment fee with hard money loans?

Usually Lake Worth hard money loans have a 3–6 month minimum interest condition. By way of 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 condition is put in place in order for the lender receives a small return for the time, hassle and apportionment of its funds to some borrower. If the borrower repays the loan after half a year, then no pre-payment penalty will be issued.

How quickly can a typical hard money loan 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 appraisal, title commitment). The typical bargain takes about one or two weeks to finance as an independent appraisal and title report need to be run on the property.

Is an appraisal needed when employing?

Yes, hard money loans typically need broker price opinion, an appraisal, or comparative sales analysis. On the subject property, we order an appraisal that is independent at Capital Funding Financial.

When completing a repair & flip or rehabilitation project, 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 worksheet and timeline. The lender will use this as a guide in releasing resources for rehab goals. Nothing ever goes as intended when performing a rehab; thus the lender will want to find the borrowers expertise in managing or performing real estate repairs. The lender require an inspection and will release funds in draws for such repairs that are listed. The lender will even require income statement and a credit report in the borrower to exhibit that the borrower has the ability to repay the loan. Yet, hard money lenders focus largely on the asset value of the security 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.