Comparing Bridge Loans and Hard Money Loans
Bridge loans: A bridge loan is a type of short-term loan lent by a bank to fund the purchase or renovation of a property. Hard money loans: This short-term loan is a lent by a private investor and is secured by the value of a property.
Similarities
Bridge loans and hard money loans share so many similarities that they’re often thought to be interchangeable. One of the main similarities between the two is that they’re both short-term loan options. This means that they don’t require long-term repayment plans like a typical mortgage would. As such, they’re both often used to fund things such as home renovations or fix-and-flip projects. A short-term loan is ideal for these cases because the borrower expects to resell the property—and therefore recoup their money—quickly. Another similarity between the two loan options is that they can be secured by the value of the property for which the money is loaned to pay off. Therefore, your credit doesn’t have to be taken into consideration when you apply for either loan.
Differences
The main difference between bridge loans and hard money loans is who lends them. While hard money loans are lent by private investors, bridge loans are provided by conventional lenders such as credit unions and banks. Therefore, bridge loans often have lower interest rates because the lender is taking less of a risk on the investment. The lower interest rate is an attractive feature, but bridge loans also come with more limitations on what you can use the money for: they can essentially only be used for buying property. A hard money loan, however, can be used for many different purposes, and it can be acquired much more quickly because banks tend to be more selective than private lenders. Another difference between the two loans is the duration of their terms. According to Allied Commercial Funding, bridge loans are intended to be paid off in just one or two years, while hard money loans can last anywhere between six months and five years. Streamline Mortgage is one of the best hard money lenders in Reno and Las Vegas. If you’re interested in receiving a hard money loan, you can apply online today or visit us at one of our locations.