or call (561) 221-0900 to be connected to a loan officer

What is a hard money loan?

A hard money loan is a type of financing provided to a borrower by a lender, primarily based on the assessed value of the underlying collateral asset. Unlike traditional bank loans, which heavily consider the borrower’s creditworthiness and income, hard money loans focus primarily on the value of the asset used as collateral. Typically, these loans are utilized as short-term solutions, with durations ranging from 1 to 5 years, serving as a bridge to facilitate property acquisition, rehabilitation, or stabilization in various real estate sectors such as commercial, retail, office, industrial, multi-family, or single-family residential properties.

Why would a Miami real estate investor pick a hard money loan (asset–based loan) over a conventional loan provided by a bank with lower rates?

Quick Funding Timeline – Banks generally take at least 45 days to fund a residential loan, 60-90 days for a commercial loan, and over 120 days for a development project. In contrast, a private lender can typically fund deals within 7-14 days.

Financing For Fixer-Uppers – Strict bank underwriting means they rarely finance properties needing heavy repairs or redevelopment. However, private lenders happily provide loans for fix-and-flips or value-add deals as long as the borrower has sufficient equity invested. For example, borrowers can utilize short-term hard money loans to acquire and renovate properties before obtaining permanent bank financing once the asset is stabilized.

Asset-Based Lending – Banks focus heavily on borrower credit scores, debt-to-income and ability to service debt. High net worth borrowers are often declined by banks if they have existing debt obligations. Private lenders emphasize loan-to-value based predominantly on the deal specifics and underlying asset rather than borrower credentials. At Gelt Financial our lending decisions revolve around a target loan-to-value ratio in the 65% range per transaction.

The speed, flexibility, and asset-centric nature of private money can fulfill an essential niche for real estate investors versus conventional lending sources. Choosing the optimal capital provider depends on the borrower’s priorities and project particulars.

What are the interest rates in Miami’s hard money loans?

Hard money loans in Miami typically have higher interest rates than conventional bank financing, but offer greater speed and flexibility. Some key details on rates:

• Interest Rates – Miami hard money loans generally carry interest rates ranging from 10% to 15%, significantly higher than conventional mortgage rates. Factors like loan-to-value ratio, project risk, and property type impact rates.
• Points – Upfront fees paid directly to lenders, known as “points”, are common with hard money loans in Miami. One point equals 1% of the loan amount. Investors often pay 2-5 points when originating these loans.
• Term Length – Hard money loans in Miami usually have shorter repayment terms of 6 months to 3 years. The shorter timeframe leads to higher effective interest costs.
• Prepayment Penalties – Many Miami hard money lenders charge prepayment penalties if loans are repaid early, ensuring they receive full expected interest payments.

While cheaper financing options are available, they come with longer wait times that can deter investors from capturing opportunities in Miami’s fast-paced real estate market. The benefit of flexible, rapid funding makes hard money loans’ higher rates and costs worthwhile for many home flippers and property developers operating in the area. But borrowers should analyze their business model to ensure the numbers pencil with higher financing expenses.

What factors affect the interest rate for a hard money loan?

Several key factors influence hard money loan interest rates in Miami:

1. Loan-to-Value Ratio (LTV): The higher the percentage of the property value you borrow (LTV), the higher the risk for the lender, often leading to a higher interest rate.
2. Borrower’s Credit Score and Income: A strong financial profile with a high credit score and stable income can typically secure lower interest rates.
3. Property Condition and Location: The property’s overall condition, repairs needed, and location can impact the rate. Desirable areas or properties requiring significant work might come with higher rates.
4. Borrower’s “Skin in the Game”: Your equity investment in the property (down payment) demonstrates your commitment and reduces the lender’s risk, potentially lowering the rate.

Remember: Interest rates for Miami hard money loans are typically higher than conventional bank loans due to the faster processing, flexibility, and risk involved. Comparing offers from multiple lenders and negotiating based on your strengths is crucial.
While Gelt Financial can’t claim universally “the lowest rates around,” we encourage you to reach out for a personalized quote based on your specific loan request. This way, you can compare our offer with others and make an informed decision.

How fast can a Miami hard money loan close?

At Gelt Financial, we understand that time is of the essence. That’s why we offer flexible closing options to meet your needs. If you have a complete loan package (credit report, BPO or appraisal, and title commitment), we can close your loan in days, not weeks. For more complex deals, we provide transparent timelines and work efficiently to get you funded fast.

Some interesting facts about the Miami, Florida real estate market

• Sunny Appeal – Miami ranks as the 3rd most popular destination for real estate buyers from international markets seeking a sunny, waterfront location.
• Foreign Buyers Abound – Roughly 36% of all Miami home sales go to international buyers, predominantly from South America and Europe. All-cash purchases make up over half of Miami home sales.
• High-Rise Hotspots – Miami boasts over 300 high-rise condo and apartment towers, bringing a very vertical living experience far more akin to NYC than the typical Florida lifestyle.
• Prime Rental Market – Miami has one of the largest rental markets in the U.S. given seasonal residents and a younger demographic before buying. Average Miami rents rose over 15% in 2022 alone.
  Coastal Calamity Risk – $1.8+ trillion worth of coastal property in Southeast Florida faces elevating risks from flooding driven by sea level rise according to recent studies.
  Affluent Areas Abound – Miami claims 5+ luxury residential enclaves with average sales prices over $3 million including Star Island, Bal Harbour and Sunny Isles Beach.

With glitzy condo towers, proximity to beautiful beaches, and a cosmopolitan vibe, it’s easy to see why the Miami real estate scene continues attracting luxury developers and wealthy buyers from around the world.