What is a Bridge Loan?
It’s a short-term financing solution usually used to fund an investment property while waiting for long-term financing to close. Investors can secure a bridge loan for up to 12 months, often with the option to extend the terms. The name comes from “bridging the gap” between the time a project is found to securing a bank loan so you don’t lose the investment property.
Why get a bridge loan?
Interim financing for investors to secure projects fast while working toward longer-term financing is very common. Often investors need to purchase a property quickly due to competition or a desired price point. Because banks have a lot of regulatory paperwork, it can take too long for them to grant approvals, which is why investors opt for a faster closing with a hard money loan.
How can they be used?
Common investor projects include:
- Large Developments
- Condo Conversions
- Multi-Family Properties
- Mixed-Use Properties
- Commercial Properties
What terms are typically available?
Bridge Loans are flexible by nature, but usually are for up to 12 months. Loan terms also depend on how long you need until the bank loan can close.
How fast will they close?
In some cases, as soon as 48 hours of clear title. It’s important to have all materials and documents in order, and required documents are often less than new investors think.
Is an extension beyond 12 months always available?
Not always, but yes, extensions can be granted on a case-by-case basis for the bridge loan.
What are the qualifications for a bridge loan?
Applicant must have the following:
- A business structure such as an LLC
- A solid exit strategy (the plan to refinance with a traditional lender)