Typically in the past Bridge Loans and Hard Money Loans have been confused as being one in the same and to be truthful there are points which they have in common and some big differences. We are a Direct Hard Money and Bridge Lender.
Bridge loans are usually 1 to 2 years, whereas hard money is anywhere from 6 months to 5 years with a sweet spot of 1 to 3 year terms.
Achieve Objectives Reach Goals
Both have higher interest rates and neither are considered a permanent loan. Both are utilized when conventional commercial loans won’t work.
Short term Bridge Loans or Hard Money Loans can help the property owner achieve goals involving non-bankable purposes:
- Add-on or Rehab a commercial property
- Time to rent or lease out a commercial property
- Complete TI’s for new tenants (tenant improvements)
- Quickly pay discounted loan payoffs
- Payoff debt to lighten the owners DTI (debt to income ratio)
- Cash out to purchase other investment property
- and more…
The Great Dividing Lines
The dividing line between the two is FICO SCORE and/or perceived risk.
Most bridge loans are a more ‘in the box’ type of loan and need a FICO score of at least 625 or more. They take anywhere from 2 to 4 weeks to close and your DSCR (debt service coverage ratio) will be considered and may be the make break point on whether you will qualify for a Bridge Loan. Bridge Loan Rates are usually anywhere from 7% to 9.5% and fixed for a period of time. LTV (loan to value) is anywhere from 60% to 65%. The prepayment penalty can be anywhere from 6 months to the whole term of the loan.
Hard money loans are there when you can’t qualify for other types of commercial loans. Maybe your FICO has been hit or it survived a rough period and you have mortgage lates or a BK in the past 2 years. Hard money may be able to give you the money you need quickly. This type of financing will take anywhere from 5 to 10 business days to complete. Rates will run from 8.00 to 11.00% based upon the equity in the property. The higher the equity the lower your rate. LTVs are 55% to 65% max and prepayment penalties are usually 6 months on a 1 yr loan to 1 year on a 2 to 3 year loan. The best thing about Hard Money is everything is negotiable and can fit almost any situation and give the property owner exactly what he needs to achieve his future objectives.
Bridge or Hard Money – depends on your needs and qualifications.
see Commercial Hard Money 101 for more information.
Disclaimer: The above rates and terms are general guidelines and subject to change without notice. All individual loan requests will be considered on a case by case basis.