Comparing hard-money and bridge loans for a first fix-and-flip project
Have something to add?
Log in to reply
I’m researching financing for a first fix-and-flip project and trying to compare a hard-money loan with a short-term bridge loan.
The property needs a kitchen update, bathroom work, flooring, paint, and some exterior repairs. I’m estimating a six- to nine-month timeline, but I’m concerned about delays and the possibility that the resale takes longer than expected.
From what I understand, a hard-money lender may approve based heavily on the property’s after-repair value and fund some renovation costs, but usually at a higher interest rate, with points and a shorter repayment period. A bridge loan may offer a lower rate or longer term, but could require stronger credit, more documentation, and greater cash reserves.
For those who have compared these options, how did you evaluate the total cost? I’m planning to compare interest, origination points, appraisal and inspection fees, draw fees, extension charges, prepayment penalties, and the amount of cash required upfront—not just the advertised rate.
I’d also appreciate advice on questions to ask lenders about renovation draws, contractor requirements, contingency reserves, minimum interest periods, and what happens if the project runs over schedule. What loan-to-cost or loan-to-value limits and credit requirements should a beginner realistically expect?
For a first fix-and-flip, the best comparison is the total cost of capital, not just the interest rate. Hard-money loans may offer faster approvals and renovation draws, while bridge loans can sometimes provide better pricing for stronger borrowers.
Before choosing, compare LTC/LTV limits, points, draw fees, extension costs, reserve requirements, minimum interest, prepayment terms, and what happens if the project exceeds the expected timeline.
Dream Home Mortgage can help review short-term financing options and determine which structure better fits the purchase, rehab budget, and exit strategy.