What Distinguishes Hard Money Loans from Bridge Loans? Bridge Loan vs Hard Money Loan.

A bridge loan shouldn’t be considered a hard money loan. However, investors can still use the money for different reasons, such as bridge financing. Given the unstable nature of the bridge market, many investors are considering hard money as a temporary measure for their funding.

last updated Tuesday, November 5, 2024
#Bridge Loan #Line of Credit

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John Burson

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Bridge and hard money loans are considered short-term capital needs by most investors. For example, if you are looking for a discounted foreclosed house that needs some repair, it could be wise to turn it into cash if it’s a rental property. Given its current state, it could prove challenging to get a long-term investment, and it’s essential to always source for a different debt financier.

Bridge Loan vs Hard Money Loan

Bridge Loan Financing

Bridge loans act as a “bridge” from buying the asset to putting the actual financing on it. In most cases, investors tend to rely on lines of credit or banks for such funding, but after the credit crunch and banking crisis, banks set higher limits on these lines of credit. Until now, the credit limits have not reached acceptable levels as before the crunch, even with today’s buying opportunities becoming more compelling.

Hard Money Loan Financing

On the other hand, hard money lenders make loans with money that originates from private investors. The loans carry interest rates and original fees, which in most cases are above the market regarding long-term financing. This means that such loans are what investors are looking to pay off quickly so they can refinance them into traditional loans. Most private lenders wouldn’t be picky in the deals they finance as long as they get paid back.

Although private bridge loans can be more expensive than a line of credit, they are still more advantageous because many deals require bridge financing and are more profitable than their counterparts in the past. If you want to get deals done and seize the advantages in today’s property pricing, you need to be deep-pocketed or, in some way, take out a bridge loan. Since hard money is readily available in the market and given its unmatched benefits, it’s essential if you opt for one or two reputable lenders. This way, you can quickly take advantage of the unpredictability of such buying opportunities.

 
 
 

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