Although conventional bank loans are long-term mortgage loans with up to 30 years span, most real estate investors still do not favor them. All they need is a loan to make short-term investments, and most times, these traditional loans don’t just fit their needs. Hence they look for an alternative. The common types of unconventional loans sought out are bridge loans and hard money loans.
Bridge Loans are short-term and temporary loans that give real estate investors fast cash flow pending finding permanent financing. Real estate investors opt for bridge loans to purchase, renovate, and resell multiple properties quickly. Bridge loans can be offered by both traditional lines of credit or private lenders. This loan type expires after one year. It is commonly fix-and-flip real estate investments
Hard money loans, also known as private loans, are alternatives when traditional bank loans do not approve investors’ proposals for a loan fix. These loans are a popular and effective alternative source of financing. One of the unique features is the quality of hard money loans. Furthermore, these loans are asset-based, which means private lenders offer financing based on property value, not credit histories. In addition, since private lenders fund hard money loans, the process involved in acquiring loans is faster and easier.
If you wish to know more about the difference between bridge loans and hard money loans, click here.
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