Hard Money Bridge Loans

What is a hard money bridge loan?

A hard money bridge loan is a short-term loan made by a private lender, like Saxe Mortgage, as opposed to a traditional financing institution, such as a bank. A hard money loan occurs when circumstances are not favorable for a borrower to obtain a bank loan for various reasons.

Why would a borrower choose a hard money loan instead of conventional bank financing?

The answer is usually time-based such as when a borrower has applied for a conventional commercial bank mortgage, but the house closing date is rapidly approaching and the bank is still completing its due diligence, yet the borrower must close in a timely fashion in order to avoid losing a hefty contract deposit. Or, there is deferred maintenance that needs to be completed before the bank will lend on the property. The borrower therefore chooses to finance with a hard money bridge loan, and then after this “bridge loan” closes, the borrower can take as long as necessary to arrange permanent commercial financing.

Another scenario in which a borrower would choose a private hard money bridge loan involves the purchase of a vacant property that the borrower plans to convert to another use (i.e. office to residential). A bank would rather finance the deal AFTER the borrower has executed his business plan, rented the property, and created cash flow. A hard money bridge lender is willing to get more deeply involved than most banks, evaluating the borrower’s track record, the viability of the borrower’s current business plan to convert/improve the property, as well as the borrower’s personal guarantee or other collateral. The borrower is also fully aware that he is only going to have the private hard money loan outstanding for approximately 12 months, and that paying a higher rate of interest for a brief period of time is much less expensive than bringing in much more expensive equity partners for the long haul.

If you are looking for a hard money bridge loan, Saxe Mortgage is here to help. Give the Saxe Mortgage Company a call for more information. We are here to help.

Bay Area hard money is similar to traditional hard money, but may sometimes be more expensive as the risk is higher on investment property or non-owner occupied properties. Bay Area hard money loans may not be subject to the same consumer loan safeguards as a residential mortgage may be in the state the mortgage is issued. Bay Area hard money loans are often short term and therefore interchangeably referred to as bridge loans or bridge financing.