Bridge Loan vs Hard Money Loan: Cost, Terms and Which Fits

Bridge loans and hard money loans are both short-term, interest-only loans secured by real estate and repaid from a later event — a sale or a refinance. That overlap is why the two terms are often used as if they meant the same thing. They don’t quite. The difference is mostly who is lending and what they underwrite, and that difference shows up in the rate, the leverage, how fast the loan can close and how much cash you need to bring.

This guide puts the two side by side, runs the same purchase through both, and ends with a short checklist for choosing. For each product on its own, see our commercial bridge loans and fix-and-flip and hard money loans pages.

The Short Answer

A bridge loan is transitional financing from a bank or a debt fund, usually for an investor or owner with a track record and a defined exit: lease-up, renovation, or a permanent loan that can’t close yet. It is typically priced as a spread over a floating index, so it tends to cost less and lend a little more.

A hard money loan comes from a private lender that underwrites mainly the property — its current value or after-repair value — and less the borrower’s income or the property’s current cash flow. It is priced as a flat all-in rate plus points, costs more, and is built to close fast on deals a bank or fund won’t take in their current condition.

Side-by-Side: Typical Terms

Typical ranges on our loan pages (September 2026). Your terms depend on the property, the business plan, your experience and the lender.

Two things the table doesn’t show. First, a bridge loan’s rate floats with its index, so the payment can change during the term; a hard money rate is usually fixed for the short term. Second, the fees differ in shape: bridge loans often carry an origination fee and an exit fee, while hard money usually concentrates the cost in upfront points.

Why Bank Bridge Loans Are More Conservative

Part of the gap is regulatory. A bank’s real estate lending policy must follow the federal Interagency Guidelines for Real Estate Lending Policies, which set supervisory loan-to-value limits: 65% for raw land, 75% for land development, 80% for commercial construction and 85% for improved property. Banks may exceed those limits only within a cap tied to their capital: loans above the limits should total no more than 100% of total capital, and no more than 30% for commercial, agricultural, multifamily and other non-1-to-4-family loans. So a bank bridge loan is anchored to what the property is worth today.

Those guidelines apply to banks and savings institutions. A private hard money lender sets its own leverage and pricing, which is why it can lend on a property in poor condition or on a borrower a bank would decline — and why it charges more for that risk.

A Protection Neither Loan Has

Borrowers used to home mortgages sometimes expect a standard disclosure of the APR and total finance charge. On most bridge and hard money loans there isn’t one. Federal Regulation Z (the Truth in Lending rules) exempts credit extended primarily for business or commercial purposes, and the official commentary treats credit to buy, improve or maintain rental property that the owner doesn’t occupy — any number of units — as business-purpose credit. (A property the owner expects to use for more than 14 days in the coming year doesn’t count as non-owner-occupied.)

The practical result: you have to add up the cost yourself. Put interest, points, exit fees, extension fees and any required reserves into one dollar figure for your expected hold, the way the example below does.

Worked Example: The Same $2,000,000 Purchase, Both Ways

An investor is buying a $2,000,000 value-add property and expects to hold the short-term loan for 12 months before refinancing. The rates and fees below are illustrative values inside the typical ranges above — not quotes.

• Bridge loan: 75% LTV, 7.75% interest-only, 1% origination fee, 1% exit fee
• Hard money loan: 70% LTV, 11% interest-only, 2 points upfront

On these assumptions the bridge loan costs $35,750 less over the year and needs $113,000 less cash at closing. Closing costs such as appraisal, title and legal come on top of both. Check the leverage on your own numbers with the LTV calculator.

Where the hard money loan wins. Suppose the seller will only accept an offer that closes in 10 days. A bridge lender’s typical 14–30 days doesn’t fit that window; a hard money lender’s 7–21 days can. In that case the comparison is not $146,250 against $182,000 — it is $182,000 against losing the property. The same logic applies when the building is too distressed for a bank or fund to underwrite at all.

What the exit has to repay. The bridge loan’s extra $100,000 of leverage is also $100,000 more that the refinance must pay off. If the takeout is a permanent loan at an example 6.75% rate, 30-year amortization and a 1.25x minimum DSCR, the property needs about $145,900 of net operating income to refinance $1,500,000, against about $136,200 for $1,400,000. If the renovated property will fall short of that, the lower cash at closing now becomes cash due at the exit. Test your takeout with the max loan calculator.

When a Bridge Loan Fits Better

• You have a few weeks before closing, not a few days.
• The property has income, or a clear plan to reach stabilized income, that a lender can underwrite.
• You can document experience with similar properties.
• The hold is long enough that a lower rate outweighs an exit fee — interest is most of the cost on a 12-month hold.
• You have a specific takeout in mind: a permanent loan, an agency or DSCR loan, or a sale.

When a Hard Money Loan Fits Better

• The closing deadline is shorter than a bridge lender can meet.
• The property is vacant, distressed or mid-renovation, and a bank or fund won’t lend on it as it stands.
• The plan is a short renovation and sale, where speed matters more than a few points of rate.
• Your credit, income documentation or experience is thinner than a bridge lender requires.
• You already have a plan to move into longer-term debt — see refinancing out of a hard money loan.

Questions to Ask Either Lender

• What is the total dollar cost for my expected hold — interest, points, exit fee and any other charges?
• Is the rate fixed or floating, and if floating, is there a rate cap or floor?
• Is there an interest reserve, and does it reduce the cash I need at closing?
• Are renovation funds held back and released in draws? How fast are draws funded?
• How many extensions are available, at what fee, and what tests must the property meet?
• Is there a minimum interest period or a prepayment penalty if I refinance early?
• Is the loan full recourse, and what does the personal guarantee cover?

For more on the underlying products, see our guides to when bridge loans make sense and hard money vs. private money. If you’d like both options priced on your actual deal, start a commercial real estate loan application — there’s no hard credit pull to start, and you’ll have a decision within 48 hours.

💡 Compare short-term loans by total dollar cost over your expected hold and by the loan the exit has to repay — not by rate alone. The cheaper loan on paper can be the more expensive one if it can’t close on time.

Sources: Interagency Guidelines for Real Estate Lending Policies, supervisory loan-to-value limits — 12 CFR part 34, subpart D, appendix A (OCC); 12 CFR part 365, subpart A, appendix A (FDIC); 12 CFR part 208, appendix C (Federal Reserve). Regulation Z business-purpose exemption — 12 CFR 1026.3(a) and official interpretation comment 3(a)-3 (CFPB). Typical terms: BestLoanUSA loan terms and rate ranges, September 2026. Example figures computed with the site’s LTV and max loan calculator code.