Blog

Aug
01
FAQ:What is a Bridge Loan and how does it work?

So you are ready to buy a new property, but you are not ready to sell your current property, so you may be interested in securing a bridge loan. A bridge loan gives you the option to borrow money for the purchase of a new property by using your current property as collateral but with the wide array of financing options available in the real estate market, it can be quite a challenge to choose the option that’s best for you and your needs. At National Commercial Property Loans, we know that being well informed about your options helps you make smart decisions.

What is a Bridge Loan?

A bridge loan can be defined as a short-term loan that can be used in commercial real estate. Commonly used to bridge the gap between securing long-term financing, bridge loans can also be a great fit for real estate investment projects like a fix and flip. You may hear bridge loans being referred to as bridging financing, swing loans among others.

Bridge mortgages are used for the light rehabilitation and/or stabilization of a commercial investment or non owner-occupied properties. Rehab costs are generally included in the loan amount.

Cash flows are underwritten to pro forma numbers. Generally short term 12-36 months; lower interest rates and Fees than hard money. Generally recourse loans.

After stabilization of property; a new long term "take out" loan will be secured to pay off bridge loans and will provide lower rates and multi year amortization.

One of the key features of a bridge loan is: flexibility. Bridge loans can provide an investor great flexibility in the real estate market as a bridge loan allows them to act quickly to purchase a property, avoid foreclosure, rehab properties to keep or fix and flip an investment property. Best of all, much like hard money loans, bridge loans can be secured quickly, with little paperwork and regardless of income or credit. Bridge loans are processed faster than a conventional loan; while a bridge loan can be turned around in just a few weeks or less.

There’s a wide array of financing options but it’s always a good idea to do some research, to ensure there are no hidden issues. Keep in mind, it’s your right to choose a company you know and trust and you truly deserve the best. In the end, you’ll be glad you made an educated decision about the loan company that is right for you and met all your needs.

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Bridge Loans are available in all 50 states.


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