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Hard Money Loan Florida Miami
What’s hard money loan?
A hard money loan is a loan given to a borrower from a lender based mostly on the worth of the asset that is collateralized that is underlying. Where asset based lenders aka hard money lenders focus primarily on the worth of the asset being used as collateral for the loan traditional banks and lenders focus chiefly on the credit and income of the borrower. Where traditional loans are usually for 15–20 year durations, hard money loans are used as a temporary solution (1–3 years usually) 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 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 financing: (1) Quick Funding– traditional banks take a 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 generally financed within 7–14 days. (2) Property Requires Work– due to the traditional bank‘s very conservative underwriting guidelines, most will not lend on properties in need of repair. Nonetheless, a private lender will be happy to lend on a property that either lacks cash flow or necessitates physical progress 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 really seldom funded by banks; hence the borrower uses a hard money lender then, and rehabilitate and to purchase the property payoff the hard money loan with conventional financing. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. Yet, short term funding 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 lending once the property is stabilized for a specific period of time. (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. Thus even quality borrowers such as physicians, lawyers, and attorneys who have high incomes but also have lots of debt are turned down by traditional banks for normal funding. Therefore, there is an enormous 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 mostly on the LTV (loan to value). We generally 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?
Hard money loan rates usually range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a mix of variables for example: (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 involved in asset based lending?
Most hard money lenders in Miami charge a loan origination fee of 3% to 5% of the loan amount. Various fees for file preparation will then charge by a lawyer, financing processing fee, evaluation fee from a completely independent appraiser, and an application fee. Capital Funding Financial offers straight forward conditions without all of the junk fees that are concealed and costs an incredibly low origination fee of just 2%*
Can the loan fees be paid from the loan proceeds?
Yes there is a huge 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.
Is there a pre-payment penalty with hard money loans?
Ordinarily Miami hard money loans have a 3–6 month minimum interest condition. By way of example, with a 6 pre-payment penalty, if the borrower should happen 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 at least a modest return for the time, hassle and allocation of its funds to a borrower. If the borrower repays the loan after half a year, subsequently no prepayment penalty will be issued.
How fast 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 assessment, title commitment). The typical price takes about one to two weeks to finance as an independent appraisal and title report need to be run on the property.
When applying is an assessment needed,?
Yes, hard money loans generally require broker price opinion, an assessment, or comparative sales analysis. At Capital Funding Financial, an independent appraisal is ordered by us on the subject property.
When completing a fix & flip or rehab project, what will the hard money lender require?
Well besides the obvious 35–40% equity cushion, the lender will need to see the extent of work described with a cost analysis worksheet and timeline. The lender uses this as helpful tips in releasing capital for rehab purposes. Nothing ever goes as intended when performing a rehabilitation; so the lender will need to find the borrowers expertise in performing or managing real estate repairs. The lender require an inspection to be made after each draw is complete and will release funds in draws for such repairs that are listed. The lender will also require a credit report and income statement from the borrower to exhibit that the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the security and never 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 information.
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