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Hard Money Lenders, Real Estate Classifieds, Hard Money Resource
Posted On April 29, 2013

Common Mortgage Types

Many types of mortgages exist for financing real estate. They are separated by their cost and how much time the loans require to reach maturity (the point where their principle value is paid off). In addition, most loans will be available only to finance a certain type of real estate: commercial, residential, land, multifamily, hotels, offices, etc. What follows is a list of prominent types of non-traditional financing used commonly by real estate investors.

Commercial Loans

Are loans and mortgages used for the financing of commercial real estate. They can be of a short term or long term variety. Commercial loans include mezzanine loans as a subset.

Cost: Low-High Timeframe: Short-Long Term

Mezzanine Loans

Are loans available to corporations able to issue equity (or stock) instead of putting up property as collateral. Mezzanine loans are subordinate or junior loans, meaning that more senior loan and mortgage obligations would be paid off before mezzanine loans in the event of a borrower’s default.

Cost: Moderate-High Timeframe: Short-Long Term

Hard Money

Hard money is a specialized type of loan available for difficult to finance properties or for borrowers who would be unable to qualify for more conventional mortgages.

Cost: High Timeframe: Short-Medium Term

Rehab Loans

Are used for purchasing, repairing, or developing distressed properties. Most conventional financing sources will not finance properties in a state of disrepair. Properties that need development, repairs or rehabilitation are inherently more risky as their value is less reliable.

Cost: High Timeframe: Short-Medium Term

Bridge Loans

Are loans used to provide a gap between more traditional sources or between a purchase and a resale a short time later. The term is mostly associated with the commercial lending industry where it is used to refer to a transitional or transactional loan type similar to hard money. Generally, hard money and bridge loans can be viewed as the same thing.

Cost: High Timeframe: Short-Medium Term