A bridge loan is a rehab loan's one-armed cousin. Sometimes, you need funding for an investment (i.e., non-owner occupied) property, but you don't need any funds for renovations or construction. They're called a "bridge" loan because they're not a long-term solution; they're meant to bridge you to a funding solution a few months away, such as a sale or refinance.
For example, suppose you're a business facing a cashflow crisis, but you own some real estate that has no lien against it. Getting approved for a business loan from your bank can take months so a bridge loan can help.
Or, suppose you find a multifamily property that's not yet ready to rent out. However, the work it needs to become rent-ready is largely cosmetic, and you can fund it out-of-pocket. Well, a bridge loan is a much simpler solution than drafting costs to get approved for a rehab loan.
Unlike rehab and construction loans, only one risk "ceiling" matters for lenders: loan to value (LTV). The maximum loan-to-value you can get will depend on the asset at hand and can range from 50-80%.
Our Introductory and Term Sheet guides have more detailed information, not the costs involved.
From an interest perspective, though, the rate highly depends on the property and LTV you need. A single-family home under 50% LTV can go for below 9%, whereas a higher risk (e.g. commercial) bridge loan may cost 12-14%.
Like with other short-term finance, an origination fee of 1-3% is applicable, as are a few other smaller fees. Whatever the lender's fee structure, Hardback distils this and your interest into a single cost estimate to make comparison easy.
Your credit score (and other credit factors such as your asset ownership) can be important factors as to whether a lender will lend, though with a low enough LTV loan, these factors become less important. Even with poor or non-existent credit, the lender will want to see that you can service the loan through evidence of cash liquidity.
The best thing about bridge loans is how fast you can close. We've seen 48-hour turnarounds before, and though that may be rare, the simplicity of the financing means two weeks is usually sufficient time to close.
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