- Rates – starting at 9%
- Term – from 4 months
- No Upfront Cost or Contracts
- Asset-based Lending
Bridge loans are a financial instrument that allows investors to burrow large amounts of money when they are expecting to receive capital from a sale but in the near future, while they need money right away. For example – you found a great deal on an old home to fix and flip but you are still 3 months away from selling your current project. Aggressive flippers and those with eyes to the next deal can utilize bridge loans effectively in order to avoid liquidity issues.
Because bridge loans are very similar to hard money loans, in their asset-based nature, so they loan is measured by mostly the collateral offered. Bridge loans may be the fastest loans to approve due to their speedy nature and investor need for quick approval. And while bridge loans interest rates may be high, the short duration makes this an attractive solution for investors in need.
Businesses also at times require bridge loans, to fill in immediate capital needs such as payroll or cost of goods. Once the business is cash rich, it pays back the loan. It is also common to see in residential home purchases – when a family wants to switch homes and have not yet sold their current home. In this example, the family spots their new dream home and does not want to miss out on the purchase (this could be especially true if the market is hot). The bridge loan will ‘bridge’ the gap in missing capital for the family, and the loan gets repaid once the old home is sold.
Private capital works for investors because sometimes, you don’t have all the time in the world to secure financing. Waiting for a bank to approve your loan, submitting endless paperwork just don’t fit well in a competitive environment where you need to move fast. Hard money loans are the perfect tool for investors looking to close a deal quick. Traditional loans from banks can take up to 45 days or longer, hard money loans can close in as fast as a week. Once the deal is secured and the property purchased, the buyer is free to refinance the property with a traditional loan.
Another less known advantage of bridge loans – flexibility. Too often, we get buyers who just got rejected by a bank because the apartment building did not fit a ‘perfect lending’ criteria. Investors and bank can look at the same deal and reach two vastly different conclusions. Private lenders don’t have arbitrary lending criteria thanks to asset-based lending.
Traditional loans can take several months to close. We can do it in a few days
Rates start from 8% with low cost to close. If we can find you a hard money loan you pay nothing
Up to 80% LTV
Access the maximum equity in your asset and unleash your investment portential
Bridge Loans Definition
What is a bridge loan? A loan that is temporary in nature, often a few months long, to carry the investor in a period of time when capital is tight, until a later time when they can pay the loan. The most common example is purchasing a new home BEFORE you sold your current house, so the buyers secure a bridge loan until they are able to secure a buyer for their current home.
The main benefit of a bridge loan – you don’t lose the deal that comes your way when you don’t have the money to purchase it right now, but later. Bridge loan can carry you (for a cost of course) until you sell or secure a more stable loan down the line.
The drawback – bridge loans are short term and come due pretty quick. Typically a bridge loan is due in a few months, so if you can’t sell your current property to satisfy the bridge loan, you might have to lower the price to avoid financial stress. Another draw back is the obvious – paying two loans payments at one time.
Common Questions for Bridge Loans
Here are the most frequent questions we get when it comes to bridge loans:
Q: What can I do to increase my chances to qualify?
A: Make sure you have all of your paperwork ready – any underwriter will probably ask you questions about the property and about your experience as an investor. This is the part that usually takes the most time, so be prepared ahead of time.
Q: Are the rates going to be really high?
A: Hard money rates are higher than traditional bank loans. Since they are riskier, done faster, and require less underwriting, the rate is higher. Typically hard money loans will be 4-5% higher than standard interest rates.
Q: Why should investors take a high-interest loans if banks give lower interest rates?
A: Banks take a long time to approve loans, and they often apply very rigid funding criteria to deals. So if you have a special situation or circumstances, you may be out of luck. Hard money loans are also perfect for buyers who want to close a deal quick, and can’t wait 45 days for a bank approval. Hard money is not for everyone, but there are investors that are able to buy property not possible otherwise, thanks to hard money loans.
Q: Can I qualify if I have bad credit?
A: Yes. Hard money loans for multifamily is focused on asset-based underwriting. This means that your credit score is less important than the strength of the property you are buying. Your experience is still important, and a good credit score helps a lot – but burrowers with bad credit qualify for hard money loans all the time.
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