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Hard Money Loan Florida Miami
What is hard money loan?
A hard money loan is a loan given to your borrower from a lender based primarily on the worth of the asset that is collateralized 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 mainly on the value of the asset being used as security for the loan. Where traditional loans are normally for 15–20 year durations, hard money loans are used as a short term solution (1–3 years normally) as a bridge to acquire a rehab, or stabilize a commercial, retail, office, industrial, multi–family, or single family residential dwelling.
Why exactly would a person pick a hard money loan (asset–based loan) over a conventional 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 economical traditional financing: (1) Quick Funding– conventional banks take a minimum of 45 days to fund just one 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 conventional bank‘s very conservative underwriting guidelines, most will not lend on properties needing repair. For example, banks quite infrequently finance a loan secured by a property in need of repairs before it can be used; so the borrower will use a hard money lender then, and to purchase and rehabilitate the property settlement the hard money loan with conventional lending. Another example would be a commercial property that has no tenants… a bank won’t loan until the property is leased up. However, an exclusive lender provides short-term lending to the borrower to purchase the property and rent it up. Once the property is stabilized for a time period that is particular, the hard money loan will be refinanced by a commercial lender with normal funding. (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. Thus traditional banks for conventional financing consistently turn down even quality borrowers such as for instance doctors, lawyers, and solicitors who have high incomes but also have lots of debt. Thus, there’s a huge need for private lenders who look more at the value of the underlying asset when compared with the amount of the loan versus the borrower’s credit history. We typically 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?
The rate by the lender is determined by looking at a combination 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 Miami charge a loan origination fee of 3% to 5% of the loan amount. The lender will subsequently charge various fees for document preparation by a lawyer, an application fee, assessment fee from an unbiased appraiser, and financing processing fee. Capital Funding Financial offers straight forward provisions without each of the hidden junk fees and charges an extremely low origination fee of merely 2%*
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 (other than the application fee) are paid in the actual loan earnings.
Will there be a pre payment fee with hard money loans?
Generally Miami hard money loans have a 3–6 month minimum interest prerequisite. For example, with a 6 pre-payment penalty, if the borrower were to repay the loan in 3 months, there would be 3 extra months of interest due. This condition is put in place so the lender receives a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, subsequently no prepayment 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 bargain 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 evaluation required,?
Yes, hard money loans usually demand 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 fix & flip or rehab project, what will the hard money lender require?
Besides the obvious 35–40% equity cushion, the lender will want to see the scope of work described with a cost analysis worksheet and timeline. The lender will use this as helpful information in releasing capital for rehab purposes. Nothing ever goes as planned when performing a rehab; therefore the lender will need to see the borrowers experience in managing or performing property repairs. The lender will release funds in draws and require an inspection to be made after each draw is complete. The lender will also require a credit report and income statement in the borrower showing the borrower has the ability to repay the loan. Nevertheless, hard money lenders focus mainly on the asset value of the collateral rather than 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 info.
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