Hard Money Lender Florida | Hard Money Loan Florida (2024)

FAQs

Is hard money lending legal in Florida? ›

Legal Compliance and Property Type

Hard money loans Florida are limited to certain property types, mainly 1-4 unit single-family residences. The property must also comply with zoning laws.

The average interest rate for hard money loans in Tampa can range from 6.99% to 18%, depending on the direct lender's terms. This is slightly higher than the national average of 11.05%, with the average interest rate for hard money loans in Tampa, including bridge loans, being approximately 11.6%.

Hard money loans are risky. This is primarily because they come with higher interest rates and shorter repayment terms, and they have limited regulations compared to typical mortgages. This means that you, as the borrower, would have very little protection or options if you were to need help repaying the loan.

In general, hard money lenders and private lenders do not report to the credit bureaus.

On account of risk, hard money loans come with higher interest rates because they can lead to a substantial financial burden if the borrower defaults on the individual investor or company.

(1) Loans; general limitations.--

A bank may extend credit to any person, including any related interest of that person, in any amount up to 25 percent of its capital accounts for loans and lines of credit, all components of which are amply and entirely secured.

Hard money loans are typically used by real estate investors, developers, and flippers. They can be arranged much more quickly than a loan through a traditional bank, and loan terms are generally short - 6 to 18 months.

Hard money lenders can take on more risk since there is a higher return on investment and a quick turnaround time. Hard money loan terms are usually short, typically lasting 1 – 3 years. This fast turnaround means lenders will profit quickly – either from interest on the loan or if you default on the loan.

Rates for hard money loans can vary, but the average interest rate is generally between 10% and 18%, which is significantly higher than a conventional loan. On top of that, other costs are often associated with these types of loans, including points and origination fees ranging from 2% to 6%.

In addition to the risks of fraud and high interest rates, taking out a loan from a money lender can also have serious consequences for your credit score. Money lenders typically do not report your payments to the credit bureaus, so your credit score will not improve if you make all of your payments on time.

What happens if you default on a hard money loan? ›

If you default on the hard money loan at any point, the lender takes the property and sells it, using the funds to pay off the outstanding loan. The lender would only need to sell the home for 40% – 50% of its original sales price to make its money back.

Here's how a typical hard money loan works: The borrower wants to purchase a fixer-upper for $100,000. The estimate for renovation costs is $30,000, and it's projected the rehabbed property can be sold for $180,000. In this example, the hard money lender will lend 70% of the home's projected value after repairs.

A hard money loan relies on real estate equity. There are no credit score requirements and loan decisions happen quickly. Although higher risk means a higher interest rate, hard money loans can be beneficial and are often the only way to take advantage of investment opportunities.

Using the proceeds from selling your investment property is one of the most common repayment methods for hard money loans. Generally, hard money loans allow investors to purchase run-down properties quickly. Then, after an investor increases the property's value through repairs, they can sell it for profit.

But did you know that if your hard money loan is categorized for “business” versus “investment” or “personal”, the interest payments are tax deductible? That's right—using a hard money loan could help lower your overall investment costs and put more of your profits back into growing your business.

Florida law limits interest rates to protect its residents from predatory lending. Under Florida law a two-year $2,000 loan is limited to 31% APR. Florida law and make loans over 100% that are illegal in Florida.

There are no license requirements for commercial lenders, brokers or lessors. Florida does, however, impose criminal as well as civil penalties for usury and loan sharking. In addition, Florida also has a law prohibiting loan brokers from assessing or collecting an advance fee from a borrower.

Installment Loans in Florida

An installment loan is a short-term loan that allows you to pay a loan over a longer period of time than a traditional payday loan. In Florida, you can apply for an installment loan from $100 - $1,000.

Florida owner financing is possible even if an existing mortgage loan already encumbers the property, although it is possible the lender on the original loan will accelerate the loan (make full payment due immediately in accordance with the terms of the mortgage) when the sale occurs.