Funny thing is that most people take that hard money loans and bridge loans to be the same thing. This is not the case; there is a very basic difference between these two. Not all bridge loans are hard money loans. Many investors make use of hard money loans for a wide number of things including bridge financing. The confusion mainly arises from the fact that the current bridge financing market is quite unhealthy which leads to a large number of investors opting to use hard money for their temporary financing needs.
Investors opt to use hard money bridge loans to satisfy their capital needs. For instance, you can want to buy a house and you stumble upon a greatly discounted house that is being foreclosed. You see that the deal is too good and you do not want to let it go. You want to buy the house so that you can rent it out but its condition is very bad and it needs a lot of renovation before you can be able to put it out in the market. No lender will be willing to advance you a long term loan to renovate the property due to the bad condition. A bridge loan will suffice at this point. In simple terms, a bridge loan helps you to survive between the time when you buy the house and when you will be able to get permanent financing to pay for the house. Investors used to approach banks to get bridge financing. However with the hard hit that the economy has been recently getting, many banks have opted to stop giving this type of financing and those that still do have put in place very tight limits.
With hard money loans on the hand, the money is sourced from private investors. The loans come with interest rates and origination fees that are a bit over the prevailing market rate. These rates though still lie between reasonable limits. Normally investors turn to them because they know that they can get this money quickly without having to go through a lot of scrutiny and they can pay it off quickly. The process that the private lenders will take the borrower through is much shorter and much faster compared to the one that the banks will take you through. This makes it easier for the investors to acquire the cash that they need for the current financing needs that they have. This is what has given rise to the hard money bridge loans.
Almost everyone is familiar with the word loan but not very many people understand the real meaning of hard money bridge loans. To understand this concept better, we need first of all to dissect the meaning of the word bridge. A bridge is something that links to different things or places together in some way. For example if a your route requires you to pass over a water body, the only option to get to the other side is by building a bridge. Similarly, in real life situation there are things that sometimes seem almost impossible to achieve but somehow somewhat away out is arrived. In simple terms, hard money bridge loans are loans that are availed to those individuals who are in need of large sums of money within a short period of time in order to purchase property such as a home.
In normal circumstances, it might be a little bit difficult apply for hundred thousands of dollars and get it approved for example within a week. Assuming you have seen this nice home that you have been dreaming and you really want to buy yet you don’t have the cash at that moment. The probable thing you would do is to immediately sell your current home and use the money to purchase the new house. But easy do you thing that is? This is now where hard money bridge loans come in handy. Even if you were to apply for a normal loan in a bank, it will definitely take you at least 3 months before you get the money. This is because borrowing such huge amounts of money requires that you sign several documents.
That is why hard money bridge loans remain the only option for you to secure that property before another buyer gets on your way. The advantage of such kind of loans is that there is less paper work and you are assured of getting the cash within few days. The only thing you need to do is to ensure that you have a proper exit plan so that you can repay the loan as quickly as possible. You should also ensure that your equity position is healthy which implies that the loan you are applying for is tandem with the collateral you have provided.
In general, bridge loans always help people to achieve that which seem impossible. You can easily get whatever amount you want and purchase your property before it is bought by someone else. However, to reduce the interest rate you need to speed up the process of disposing your existing house.
Information on Hard Money Commercial Bridge Loans
Hard money commercial bridge loans are designed to offer businesses the financing they need until they are able to acquire long term financing. The US Funding Solutions offers hard money bridge loans which are available in different programs. They represent various private lenders. These lenders specialize in hard money lending for the purpose of acquisition of commercial property and refinancing. Properties offered loans include multi-family properties, mixed use properties, offices, warehouses, industrial properties, retail properties, hospitality and special use properties. These loans are the perfect solution to keep the business going before secure long term funding comes along.
The hard money commercial bridge loans through US Funding Solutions are offered up to $15 million with down payments that are as low as 15%. The loan term varies between one to five years and the loan to value ratio is up to about 75%. They offer the loans throughout the US thus are not limited to various regions.
The interest rates depend on the type of loan, the risk profile of the investment and the structure. They vary between 8% and 14%. The hard money bridge loan programs offer a payment method of either interest only or principal amortization and a DSCR minimum of 1.2. Early repayment is allowed but it is reviewed on a case to case basis and to be determined by the lenders.
Security needed is the first mortgage lien and additional collateral repayment is determined on a case to case basis after assessment of the circumstances. This makes it easy to be able to qualify for the loan as only the first mortgage lien is required. There are various deposits expenses to be made together with the initial deposit made in the first payments. These are the third party expense deposits for the acceptance of term sheet, the closing expense deposit for the acceptance of closing letter and the unused expense deposits which is refundable.
There are no charges for the initial underwriting thereby reducing the overall charges for the one taking the loan. The US Funding Solutions is a reliable source of hard money bridge loans. The qualifications vary depending on the specifications given by the private lenders. The loans are secured in real estate and the lenders use the equity in real estate for their business. The private lenders are a good option for a business stuck without finance as they get an opportunity to continue with business.