Swing Loan Versus Hard Money Loans

You may have heard the terms swing loan or bridge loans before. They are often used interchangeably and go by many different names. So it should be understood that bridge loans often go by the name bridge mortgage or swing loan. Hard money loans also go by many names, such as private money loans, hard cash loans, asset-based loans, personal financial loans, and more. At Abbey Mortgage & Investments, we offer swing or bridge loans that are privately funded and have years of experience wading through the confusing language that surrounds swing or bridge loans and hard money loans. In today’s blog, we are going to put our expertise to fair use and help shed some light on the differences between swing or bridge loans and private money loans.

Not All Swing Loans Are The Same

A swing or bridge loan is a short-term loan that is offered exclusively to investors and small businesses and is often not offered by big banking industry lenders. These loans are available from private money lenders and big banks alike. While it’s not as common for banks to provide them, there are still some that provide wing loans. However, they usually require that you use their traditional mortgage program after the term of your loan when you are seeking permanent, long-term financing.

Additionally, a swing or bridge loan from a bank or traditional mortgage lender has an approval process based on credit score, financial history, income to debt ratio, and other similar factors based on your financial responsibility. The method of qualifying from a private money lender is solely based on the collateral that you offer for the loan. If you do not pay back the loan, then the organization who loaned it will take possession of the asset you used to secure the loan. Private money bridge loans are easier to qualify for and get your money much quicker, but they may not be right for every situation.

All of this means that there can be a Bridge loan that is also hard money loans and those that are not; therefore, not all bridge loans are private money loans.

A Swing Loan is Strictly For Real Estate

One significant difference is that swing or bridge loans are used for buying real estate. They can be used to buy a fix and flip property to profit off of. They can also be used to buy an investment property before another property has been sold. The latter is the most common since few people qualify for two mortgages, and you often want to move quickly on an investment property you love rather than risk losing it as you wait.

Private money loans can be used for real estate, but they are not restricted to only real estate uses. Private money loans taken out by a business can sometimes be used to make ends meet during periods of dry cash flow. Companies sometimes have high operating costs that can be tough to cover during periods of low business. They may need emergency equipment and supplies that they can’t afford at the moment but will have the ability to pay for once business picks up. A private money loan can be a viable option for small businesses in a pinch. It’s not without risk, though — especially if the company does pick up.

Commercial and residential differences

Commercial and residential bridge loans have many similarities when it comes to approval, flexibility, and speed. Both loans are used exclusively for real estate, and the main differences come from the borrower who is requesting the loan. Commercial loans are granted to businesses, developers, corporations, or other business organizations, while residential bridge loans are granted to an individual or investor group.

Swing Loan Terms

Swing or bridge loans and hard money loans can have different repayment period lengths or terms. Terms are typically very short and mature after about six months. However, they are sometimes extended out to 12 months or even longer in certain situations. Private money loan terms are most commonly 12 to 36 months, depending on the individual’s needs, and can be negotiated for up to a five year repayment period.

If you would like more information on a bridge loan or a hard money loan, or to see if you qualify for a loan, contact us at Abbey Mortgage & Investments! We are a local private lender with decades of experience helping people and businesses fund their dreams.