Typically the term Bridge loans and Hard Money loans are been confused by people in the past
as being the same thing because they have
some points in common and some points that makes a big difference. Bridge loans
are usually are generally given for 1 to 2 years period, whereas Hard Money is anywhere
from 6 months to over 5 years.
Both bridge and hard money loans have higher interest rates and neither is considered as a permanent loan because these loans are utilized when conventional loans did not work. These loans help property owners achieve their goals involving non-bankable processes like:
· Rehab or add-on a commercial property
· Time to lease out or rent a commercial property
· Pay discounted loans payoffs quickly
· To lighten DTI ratio (Debit To Income Ratio) payoff the debit
· Cash out facility to purchase investment property
The major difference between them is FICO Score; a number representing the creditworthiness of a person, the likelihood that person will pay his or her debts. Bridge loans are in box type of loan and require a FICO score of 625 or more. The lender will take anywhere from 2 to 4 weeks to close your DSCR (Debt Service Ratio) will be considered and it could be the make or break point on whether you qualify for a Bridge loan.
The rates are normally between 7 to 9% and it is fixed for a period of time. LTV (Loan to Value) ratio is between 60 to 65%. Prepayment penalty could be anywhere from 6 months to the whole term of the loan.
Hard Money Loans
When you cannot qualify for other types of commercial loans California Hard Money Lenders are there to help you. Hard money lenders are able to give you loans quickly. It will take about 5 to 10 business days to complete the process. Interest rates are from 8 to 11% based on the equity in property, higher the equity lower will be your rates. LTVs are 55 to 65% maximum and prepayment penalties are normally 6 months on a 1 year loan to 1 year on a 2 to 3 year loan. The good thing about Hard Money is everything is negotiable and it can fit any situation and give the property owner exactly what he needs to achieve in his future objectives.