A hard money loan is a loan given to your borrower from a lender based mainly on the value of the underlying collateralized asset. Where asset based lenders aka hard money lenders focus primarily on the value of the asset used as collateral for the loan traditional banks and lenders focus mainly on the credit and income of the borrower. Where traditional loans are normally for 15-20 year periods, hard money loans are used as a temporary 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 home.

There are many reasons why a borrower would choose to use private financing or a hard money loan over a more economical traditional funding: (1) Quick Funding- conventional 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 generally financed within 7-14 days. (2) Property Demands Work- due to the traditional bank’s very conservative underwriting guidelines, most will not lend on properties in need of repair. As an example, banks really infrequently fund a loan secured by a property in need of repairs before it can be used; consequently the borrower will use a hard money lender settlement the hard money loan with normal lending, 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. However, a private lender will give you short term lending to the borrower to buy the property and lease it up. Once the property is stabilized for a time period that is specific, the hard money loan will be refinanced by a commercial lender with traditional financing. (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 quality borrowers such as for instance physicians, lawyers, and solicitors who have high incomes but also have lots of debt. Hence, there is certainly a huge need for private lenders who look at the value of the underlying asset when compared with 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.

Hard money loan rates generally range from 10% all the way up to 15%. The rate by the lender is dependent on looking at a combination of variables 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” (sum of cash equity in the property). At Capital Funding Financial we offer the lowest rates around starting at 7.99%*

Hard money lenders in Orlando charge financing origination fee of 3% to 5% of the amount of the loan. Various fees for file preparation will then charge by an attorney, assessment fee from an independent appraiser, a loan processing fee, and an application fee. Capital Funding Financial offers straight forward provisions without each of the hidden trash fees and costs an incredibly low origination fee of just 2%*

Yes there is a big enough equity cushion in the real estate. Most of the time each of the fees (besides the application fee) are paid in the actual loan proceeds.

Usually Orlando hard money loans have a 3-6 month minimum interest condition. For example, with a 6 pre-payment fee, if the borrower should happen to repay the loan in 3 months, there would be 3 additional months of interest due. This requirement is put in place so the lender receives at least a little yield for the time, hassle and allocation of its funds to your borrower. If the borrower repays the loan after six months, then no pre-payment penalty will be issued.

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 appraisal, 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.

The Orlando hard money lender will need to see the extent of work described with a cost analysis timeline and worksheet. The lender will use this as a guide in releasing capital for rehabilitation purposes. Nothing ever goes as planned when performing a rehabilitation; thus the lender will want to see the borrowers experience in performing or managing property repairs. The lender require an inspection and will release funds in draws. The lender may also require income statement and a credit report in the borrower to show the borrower has the ability to repay the loan. However, hard money lenders focus primarily on the asset value of the collateral and not the credit score.