Hard Money Bridge Lenders: What You Need to Know

Hard money bridge lenders offer short-term, high-interest loans for real estate investors. These loans are designed to help investors cover the gap between the purchase of a property and the sale of another one.

The typical loan term for a hard money bridge loan is 6-18 months, allowing investors to quickly access the funds they need to complete a project. This short-term nature of the loan makes it ideal for investors who need to move quickly.

Hard money bridge lenders charge high interest rates, typically ranging from 8-14% per annum, in addition to fees that can range from 2-5% of the loan amount. These high costs are a trade-off for the speed and flexibility that hard money bridge lenders offer.

Hard money bridge lending is a type of financing that allows you to borrow money quickly to cover a short-term gap in your project timeline. This type of loan is usually used by property flippers who plan on buying a property, fixing it up and selling it very quickly.

Hard money bridge loans have terms that are based mainly on the value of the property being used as collateral, not on the creditworthiness of the borrower. With traditional loans, a high credit score typically means you have a better chance at a larger loan and a lower interest rate, but with hard money bridge loans, the terms are more flexible.

You may be able to re-negotiate payment terms throughout the loan, which is helpful if your project timeline changes. A hard money loan has to be paid off quickly, usually within one to three years.

If the borrower does not pay it off, the lender can take the property, which was used as collateral. With hard money bridge lending, you don't need a high credit score because you are not getting the money from a bank.

Hard money bridge lenders offer a quick and easy approval process, often taking just a few days. This is because they focus on collateral rather than an applicant's financial position.

The approval process for hard money bridge loans is much quicker than applying for a traditional loan through a bank. Lenders spend less time combing through a loan application verifying income and reviewing financial documents.

Hard money bridge loan lenders will ignore past issues that would be deal-breakers for traditional banks, such as foreclosures or bankruptcies. This makes it easier for business owners with a less-than-perfect credit history to secure a loan.

One of the biggest snags with commercial real estate investment is the time it takes to get a traditional loan, but hard money bridge loans can be approved in just a few days. This makes them ideal for real estate purchases that require a quick turnaround, such as flipping a home.

Commercial real estate loans from hard money bridge lenders are backed by property equity or a significant down payment rather than one’s creditworthiness. This makes past issues irrelevant when applying for a loan.

Hard money bridge lenders offer a unique financing option for real estate transactions.

These loans are primarily used for real estate transactions, which is why they're a popular choice for investors and property flippers.

One of the main benefits of hard money loans is that they can be raised quickly, often in a shorter time frame than traditional bank loans. This is because they rely on collateral rather than the financial position of the applicant.

The cost of a hard money loan is typically higher than traditional financing, reflecting the higher risk that the lender is taking. However, this increased expense can be a tradeoff for faster access to capital.

Hard money loans often use property as collateral, which means that the lender has a secured interest in the property. This can be a good option for borrowers who need to raise money quickly but may not have a strong credit history.

Here are some key characteristics of hard money loans:

Interest Rates on Hard Money Loans can be quite steep, with an average interest rate of 10% to 18% as of May 2024. This is much higher than traditional mortgages, which offered an interest rate of between 6.95% and 10.5% during the same month.

For short-term investors or flippers, high interest rates might not be a major concern, as they plan to pay the loan back quickly. But for most people, it's essential to look for a loan with a lower interest rate.

Hard money loans come with additional fees, including origination fees, closing fees, and prepayment penalties. Origination fees are a percentage of the total loan amount, and closing fees include appraisal fees, title fees, and insurance fees.

Hard money loans generally have a higher interest rate than traditional mortgages. The average interest rate offered on a hard money loan was between 10% and 18% as of May 2024.

This is significantly higher than a regular mortgage, which during the same month offered an interest rate of between 6.95% and 10.5%. For most people, this makes sense to consider when looking for a loan.

The high interest rate on hard money loans is due to the lender assuming more risk. They may require a higher down payment than a traditional loan would, and you'll have a shorter period to pay back the loan.

Here's a comparison of average interest rates for hard money loans and traditional mortgages:

For flippers and short-term investors, a high interest rate might not be a big deal, as they plan to pay the loan back quickly.

A commercial hard money loan will often have an origination fee, which is a percentage of the total loan amount.

Closing fees, including appraisal fees, title fees, and insurance fees, are also part of the hard money financing package.

Hard money loans can come with a prepayment penalty, so be cautious when getting one.

You don't want to get a nasty surprise when it's time to pay off the loan, especially with high interest rates involved.

These fees can add up quickly, so it's essential to factor them into your budget from the start.

Hard money bridge lenders are used by real estate investors, developers, and flippers who need quick access to funds. They can arrange loans in as little as 10 business days, compared to traditional banks which can take 30 to 50 days.

Hard money loans can lend up to 65% to 75% of a property's current value, with loan terms typically ranging from six to 18 months. This makes them ideal for short-term financing, such as renovation and resale projects.

Here are some common uses for hard money bridge loans:

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, with some hard money lenders able to issue funds in as little as 10 business days.

Hard money lenders can lend up to 65% to 75% of a property's current value, and loan terms are generally short, lasting from six to 18 months. This makes them a good option for property flippers who plan to renovate and resell the property within a year.

The higher cost of a hard money loan is offset by the fact that the borrower intends to pay off the loan relatively quickly. Hard money loans may also be used in turnaround situations, short-term financing, and by borrowers with poor credit but substantial equity in their property.

Here are some common scenarios where hard money loans are used:

A bridge loan is another example, where a person is able to get a bank loan after a private money loan, and then use that to pay off the private loan.

A hard money loan can be used for various purposes, including the acquisition of a new residential income property, or to pull cash out to purchase another income property or update your current one.

You can also use a bridge loan to get a bank loan after a private money loan, and then use that to pay off the private loan. This is a common strategy for real estate investors.

A hard money bridge loan can be secured quickly, even with a tight closing process, such as the 10-day closing process mentioned in one scenario.

This type of loan is especially useful for investors who need to act fast to secure a property with great potential for long-term rental income.

Here are some examples of how hard money loans can be used:

You can apply for a hard money loan from various lenders, such as AVANA Capital, which offers short-term financing solutions with a fast closing process and low interest-only payments for 12 to 36 months.

Capital Fund 1 also offers Georgia hard money loans, designed to meet the varying needs of real estate investors, with impressive client satisfaction and a commitment to long-term business relationships.