What Are Hard Money Loans?

Hard money loans are a type of short term financing typically used by real estate investors  to purchase properties. These loans are funded by private investors or companies and are secured by the value of the property being purchased, rather than the borrower’s creditworthiness. 
Hard money loans are generally used when traditional financing options are not available or when a quick closing is needed. Hard Money loans are typically faster and easier to obtain and rates are higher than traditional bank or insured loans.

Bridge Loans

A bridge loan is a short-term financing option used by individuals or businesses to bridge the gap between the end of one loan and the start of another. It is typically used in real estate to cover the period between the purchase of a new property and the sale of an existing one.

How Bridge Loans are Used

Real Estate Transactions:

One of the most common uses of bridge loans is in real estate transactions. For example, if a homeowner wants to buy a new home before selling their current one, they can use a bridge loan to finance the purchase of the new home. Once the current home is sold, the proceeds can be used to pay off the bridge loan.

Avoiding Contingencies

Bridge loans can help buyers avoid making their purchase contingent on the sale of their existing property. This can make their offer more attractive to sellers in competitive real estate markets.

Renovations

Bridge loans can also be used to finance renovations or upgrades on a property before refinancing or selling it for a higher value.

Business Purposes

Businesses may use bridge loans to cover expenses while waiting for long-term financing to come through, or to take advantage of time-sensitive opportunities.

Timing

Bridge loans are useful when timing is critical, and immediate funds are required for a short period.

Different Types of Hard Money Loans:

Fix and Flip Loans:

These loans are used by real estate investors to purchase a property, renovate it, and then sell it for a profit. 
The loan amount is based on the property’s after-repair value (ARV).

Bridge Loans

Bridge loans are used to bridge the gap between the purchase of a new property and the sale of an existing property. These loans are short-term and are typically repaid once the existing property is sold.

Construction Loans

Construction loans are used to finance the construction of a property. The loan amount is based on the estimated value of the property once construction is complete.

Cash-Out Refinance Loans

With a cash-out refinance loan, real estate investors can refinance and existing property and take the cash out from their equity. This cash can be used for renovations or to purchase additional properties. Additionally, refinance proceeds are generally tax free.

Rental Property Loans

Rental property loans are used to finance the purchase of rental properties. The loan terms are based on the property’s income-generating potential rather than the borrower’s credit score.

Land Loans

Land loans are used to purchase undeveloped land. These loans are typically riskier for lenders, so the 
interest rates may be higher compared to other types of hard money loans.

Commercial Hard Money Loans

Commercial hard money loans are used to finance commercial properties such as office buildings, retail 
spaces, or industrial properties. The loan terms are based on the property’s income potential.

Owner-Occupied Hard Money Loans

These loans are for borrowers who intend to live in the property they are purchasing. While less common, 
some hard money lenders offer loans for owner-occupied properties