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To close on time-sensitive real estate deals a hard money bridge loan is often used by real estate investors. Hard money bridge loans provide short-term financing in situations where bank loans and mortgage lenders are not suitable for the specific scenario of the investor. When time is of the essence to close on a property, bridge loans for commercial and residential properties can make or break the deal. Depending on the available equity in the property being collateralized for the bridge loan, the hard money lender for bridge loans can close the deal in as little as a week, if not sooner.

Lending Guidelines for Hard Money Bridge Loans

Hard money bridge loans should be treated as interim financing before a more permanent financing solution can be availed. Bridge loans are usually paid-off when an investor refinances or sells the property depending on their project plans. Similar to traditional home equity loans that allow a real estate owner to take advantage of his home equity for a variety of purposes, short-term bridge hard money loans allow real estate investors to tap into their real estate equity without all the time delays and paperwork associated with bank and mortgage lending sources.

Hard money bridge loans usually take no more than a few days to close provided all the paperwork is in order and meets the lending criteria of the lender you approach for financing. Bad credit and other borrower specific criteria emphasized by traditional real estate lenders is often overlooked or accommodated by hard money lenders when the underlying collateral can make up for these shortcomings. Moreover, the hard money bridge lender usually charges a high interest rate to handle their risk.

Residential Hard Money Bridge Loans

Residential real estate properties like single-family homes, town houses, condos and multi-unit properties are used as collateral when a lender makes a residential hard money bridge loan. Suppose an investor already owns Property A but wishes to buy Property B which offers a time-bound opportunity for profits. These opportunities can be either buying a property through a foreclosure auction, short-sale, bank reo or a rehab property with significant equity. Traditional loan sources take anywhere from two weeks to two months to finance these kinds of properties. Even when they do finance, the amount of paperwork and the loan process might compel the borrower to look for bridge financing from private hard money lenders.
A bridge hard money lender will lend the money need to close on the property B by lending on the equity available on Property A. This allows the residential real estate investor to proceed on the opportunity within the sensitive time frame. The investor who used hard money bridge loan can either refinance or sell property A and then pay-off the bridge hard money lender.

Commercial Hard Money Bridge Loans

Similar to residential process, the commercial hard money bridge loans can allow commercial real estate investors to take advantage of their equity in a commercial property to get quick financing to act on their time-sensitive deals or situations. Commercial bridge loans from hard money mortgage lenders can be availed on most of the commercial property types: apartment buildings, assisted living facilities, bowling alleys, car washes, child care centers, condominiums, retail convenience stores, distribution centers, Fitness Centers/Gyms, funeral homes, gas stations, hospitals and health care facilities, hotels/motels mixed-use Properties, mobile home parks, office buildings and nursing homes.

A real estate investor needs to consider all the high costs involved in hard money bridge loans and compare it to the opportunity cost involved in looking for other traditional sources of funding. If the opportunity warrants the need for short-term financing, then proceed with all the paperwork intact.