Bridge and Hard Money: Expensive, and Sometimes Correct

Hard money and bridge loans are asset-based, short-term and fast. They exist because conventional lending is neither fast nor comfortable with property that needs work.

What you are paying for

• Closing in days rather than weeks
• Lending on property a conventional lender would decline
• Funding renovation costs as well as purchase, in draws

What it costs

Higher rates, points at origination, and a short term — often twelve months or less. Interest is frequently charged on the full facility rather than only on drawn funds. Every month of delay is expensive in a way that conventional debt is not.

When it is the right tool

When speed wins the deal at a price low enough to absorb the cost, and when you have a specific, credible exit — a sale or a refinance already scoped — inside the term.

When it is the wrong tool

When it is being used to buy a property you cannot otherwise afford, or when the exit is "we will figure it out". The term will arrive faster than the plan.

Underwrite the exit first

Before drawing a bridge facility, confirm what the refinance lender will require — seasoning, appraisal basis, coverage ratio — and whether you will meet it in time. The bridge is only as safe as the loan that replaces it.