Bridge Loans

A bridge loan solves a timing problem. You have an opportunity now and your permanent financing, your sale proceeds or your refinance is not ready yet. Bridge money spans that gap. It is priced for speed and certainty rather than for the lowest possible cost of capital.

When a bridge loan is the right tool

• You need to close quickly on a property and cannot wait on conventional underwriting
• You are buying before an existing property sells
• The property will not qualify for permanent financing in its current condition or occupancy
• You are recapitalizing a property while a longer term facility is arranged
• A seller wants a fast, clean close and is pricing the discount accordingly

The exit is the underwriting

On a bridge loan the most important question is not whether you can afford the payment. It is how the loan gets repaid. A credible exit is a signed listing agreement, a refinance you already qualify for, or a sale contract. A hopeful exit is an assumption that the market will cooperate in eighteen months.

Structure the exit before you take the loan. If the plan is to refinance into a DSCR rental loan, confirm the property will actually hit the required coverage ratio at stabilized rent. Investors get into trouble when the bridge matures and the take out financing they assumed would be there does not qualify.

Bridge loan versus fix and flip loan

A fix and flip loan includes a renovation holdback released in draws. A bridge loan is acquisition capital only. If your project requires construction funding, a pure bridge loan will leave you paying for the entire renovation from your own capital. Ask for the rehab facility explicitly.

Frequently asked questions