Hard Money: The Perfect Source for Bridge Capital

San Diego hard money, also know as private money, can be a perfect source for bridge loans. A bridge loan is a general term used to describe a short term loan. Typically bridge loans are less than 12 months but could extend as far as 24 months.

Bridge loans are used for commercial and residential purposes.

Bridge loans are typically used as a stop gap measure until a borrower is able to secure permanent financing. Since these are short terms loans, they typically carry points and fees that are a great deal higher than conventional bank loans.

In cases when a borrower needs a short-term loan, it’s sometimes necessary to find private money sources to get a loan.

The following are some examples of when someone might need hard money for a bridge loan:

1. You need to close on a purchase quickly

2. To keep a property from being foreclosed upon

3. Refinance a loan that is being called due or reaching a balloon period

4. Take advantage of an opportunity with a quick turnaround

5. Need to draw on equity through a cash-out loan before selling a property

6. Get a short term business loan secured by equity in your property

In order to qualify for a hard money loan, you would need to have the following.

1. Equity

2. Loan to Value (LTV) below 65%

3. Ability to pay the loan

Oftentimes, a given property that is already pledged as collateral may not yield enough equity. In these cases, a private investor may be willing to “cross-collateralize” several different properties to make up the difference.

While these kinds of loans can be processed rather quickly and are typically written for 12 months or less, the lender must be sure to fully underwrite the property, the borrower, and the borrower’s credit.

Typically, you’ll need to provide the following documents to make a loan request.

1. 1003/Application (Lender will provide)

2. Credit Report (Lender provides)

3. 2-6 Months of Recent Bank Statements (Borrower must obtain)

4. Income Verification (Borrower must obtain)

5. Contract for Purchase (If applicable)

6. Appraisal (If applicable)

7. Pro Forma (If applicable)

8. Executive Summary (If applicable)

9. Cost Break Down (If applicable)

The usual time frame for getting a hard money loan in place is about 7 to 14 business days after the lender has all of the borrower’s information in hand. It should now be apparent that private money loans close far more quickly than conventional loans. Because of this, private loans are a viable solution for those in need of a bridge loan.

Ultimately, they close fast and act as a good intermediate solution until permanent financing can be obtained. Like most loans, there are little or no upfront fees for obtaining a California hard money loan. Typically all fees will be paid through escrow at the close of the transaction.

If the loan is used to refinance a property, the fees can be refinanced back into the loan. If it’s a purchase loan as opposed to a refinance, the borrower will need to come up with some money for escrow before the closing of the loan.

For Example

Refinance scenario: Desired loan amount of $100k, property value of $200k, fees of $10k = final loan amount of $110k with 55 percent Loan to Value (LTV)

Purchase: $200k purchase price, $200k property value, $60k down payment, $10k fees = $140k final loan amount, $70k paid in to escrow by borrower

San Diego hard money can be used for various projects. This article shows the benefits of using hard money for bridge loans. Because hard money loans can be organized quicker than bank loans, they are often used in situation where temporary financing is needed.

In making a good loan decision it is important to evaluate your needs and identify possible ways to achieve your goals.

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