Bridge Loan vs Hard Money: Which One Fits Your Deal

A bridge loan and a hard money loan are both short-term, interest-only loans used when a property or a borrower is not ready for permanent financing. The practical difference is who underwrites what: a bridge lender looks at the borrower, the property, and the exit plan, and typically charges 8 to 12 percent with one to two points. A hard money lender looks mostly at the property, closes in days, and typically charges 10 to 14 percent with two to four points.

Those ranges vary by lender and market. The rest of this guide explains how each product works, what it costs, and how to pick.

What both loans have in common

Both are short-term, usually six to 36 months. Both are interest-only, so the payment covers interest and nothing else. Both are used when speed matters, when the property needs work, or when the borrower cannot yet document income the way a bank wants. And both are exit-driven: the lender's main question is how you pay them off, whether by sale, refinance, or stabilization.

Where they differ

How a bridge loan works

A bridge lender wants to see a credible path to a permanent loan or a sale. That means they underwrite the borrower's experience, liquidity, and credit along with the property. Because they take on less uncertainty, they charge less than hard money.

Common bridge uses:

• Buy before you sell. You need to close on a new property before the old one sells.
• Value-add. The building has vacancy or below-market rents, and a bank will not lend until it is stabilized.
• Bridge to DSCR. A rental needs light work or a tenant before it can qualify for a DSCR loan.
• Timing. The permanent lender needs 60 days and the seller will give you 21.

Bridge loans often include an interest reserve, meaning part of the loan is set aside to make the monthly payments so you do not carry them out of pocket. Extension options are usually available for a fee, often a quarter to a half point per extension.

How a hard money loan works

A hard money lender is lending against equity. If the property is worth enough relative to the loan, and the exit makes sense, the loan gets made. Credit and income get far less attention. Speed is the product: many hard money lenders can close in a week with a title report, an inspection or desktop valuation, and proof of funds for the down payment.

Common hard money uses:

• Fix and flip. Purchase plus rehab funded on a draw schedule, paid off at sale.
• Auction or distressed purchases. No time for a conventional process.
• Credit problems. A recent foreclosure, bankruptcy, or low score that a bridge lender will not accept.
• Unusual properties. Partially complete construction, mixed-use with a vacant ground floor, land with a near-term plan.

The tradeoff is cost. On a $500,000 loan, the difference between 9 percent with one point and 12 percent with three points is about $25,000 over a twelve-month hold.

What it costs in practice

Prepayment penalties are less common on short-term loans than on permanent loans, but minimum interest periods of three to six months are typical on both. Ask before you sign.

How to choose

Pick a bridge loan when you have decent credit, a documented exit, and a few weeks to close. The lower rate and longer term give you room if the plan slips.

Pick hard money when speed is the whole deal, when the rehab is heavy enough that the property will not appraise conventionally until it is finished, or when your credit or documentation will not pass a bridge lender's review.

Either way, the exit is what matters. Before you take a short-term loan, know which permanent loan you will refinance into and confirm you will qualify for it. Refinancing out of hard money is a common failure point when the exit was never checked.

How CommFi handles it

You send one application. Our lending desk prices the deal first and funds direct when it fits. When the file needs a specialist, such as a heavy-rehab lender or a lender that can close in five days, the desk searches a database of 7,000+ lenders and the ones that fit compete for it. There are no upfront fees.

Next step

Start the ten-minute application and get a pre-qualification letter that names the loan type, amount, and expected timeline, so the seller knows you can close.