Hard money loans are a functional and highly advantageous substitute to a conventional loan. They’re short-term, quick, and highly flexible unlike traditional lending services offered by banks and credit unions.
From homeowners to real estate investors, anyone can take out a hard money loan to finance a land purchase, bridge real estate investment gaps, etc. Hard money loans are offered on flexible terms and conditions and the best part is that your private lender in the US won’t dig deep to find gaps in your less-than-perfect credit score.
While all private lenders specialize in offering hard money loans, they may also offer bridge loans to real estate investors and property buyers. One of the major dissimilarities between the two is that hard money loans are usually offered at lower interest rates, whereas bridge loans are a temporary source of financing an investment project while working toward obtaining permanent financing.
You’ll often come across fixers and house flippers opting for bridge loans for smaller scale investments. Let’s delve deeper to understand hard money and bridge loans.
In short, hard money and bridge loans are obtained to fulfill one or more of the following purposes:
- Make investments secure and more streamlined
- Fuel projects with funds for swift completion
- Afford expensive projects with sturdy financial backing
Hence, hard money and bride loans are taken out to finance investment practices such as land purchase, refinancing, property improvement, and land development projects. As soon as the project is completed, you’ll either have to sell or finance a traditional loan. Whereas, a hard money lender will pay you back via sale proceeds and let you reap the benefits of your new investment.
Bridge Loan and Hard Money Loan – The Similarities
Here are all the similarities between the two types of private loans:
- Both are secured by a property based collateral instead of cash.
- The value of the collateral determines the value of the loan.
- Your hard money or bridge loan lender doesn’t take your credit history into account.
- These loans can be approved within few weeks, or even within 3 to 7 days
- Hard money and bridge loans are shorter as compared to long-term mortgage or convention loans.
- The average turnaround time for these loans range from twelve to eighteen months at maximum.
- Commercial hard money lenders and bridge financiers offer flexible repayment terms to borrowers. They also advise helpful changes in investing decisions so borrowers can enjoy a more rewarding experience.
Bridge Loan and Hard Money Loan – The Differences
While hard money and bridge loans have some very striking similarities, there are some factors that set the two private money loans apart.
- A bridge loan isn’t necessarily a hard money loan. In some cases, traditional banks may also issue line of credits to finance a bridge loan.
- Bridge loans can be obtained by a bank but their regulations and terms are very stringent. They either use the FICO score method or the BRRRR methodto evaluate the value of your bridge loan.
At Commercial Private Equity, we offer swift and flexible hard money loans and bridge loans, on the best terms and conditions. Trusted for over 75 years, our firm is a top-choice of countless businesses and private borrowers.