What Is a Bridge Loan?

A bridge loan is a loan used for a short period of time while a person or company secures long term financing. They are typically used when a buyer needs cash immediately and does not have time to go through the traditional loan process. They usually have higher interest than a traditional loan and are backed by the property that is being purchased.

What Kind of Bridge Loans Are Available?

Commercial bridge loans are a great solution for a number of financing needs. Bridge loans can provide flexible arrangements that are needed for a short term loan to help bridge the gap when one loan ends. They can also be used when a business owner is unable to secure permanent financing, but has a potential project that needs financing.

Commercial bridge loans are generally quick and easy to secure because the lender is aware you need the money fast.Securing long term financing can be a very time consuming process as there is a lot more paperwork and underwriting involved. With a conventional loan, they often require multiple revisions, so in that situation a bridge loan can ensure your deal doesn’t fall through. These loans can be for just a few months or up to a year, it can be worked out to suit your personal situation.

If you’re thinking this type of loan is only good for a commercial property, think again. Although residential bridge loans aren’t as common, they do exist and can be used if a buyer is in the process of buying one property and selling another. Sometimes the process of selling a property can take a while and if you don’t want to risk losing a potential home, a bridge loan can be very helpful. When it comes to residential bridge loans, the buyer usually needs to have very good credit and a low debt to income ratio. This allows the lender to secure both mortgages into one and offer a percentage of that total amount in the form of a loan. This means the buyer will need to have some form of equity or savings available to secure the loan.

The Bridge Loan Process

The reason bridge loans are popular in the commercial industry is because they have a quick turnaround process. This convenience does come with a cost of a higher interest rate or fees that may not be found with a traditional loan but quick cash can be very profitable long term for a commercial purchase especially if it’s one that is highly desirable. Most business owners know they will be able to pay the loan back quickly so the interest rate isn’t too much of a concern and they can avoid repayment penalties as well.

Contact Us Today!

We’re here to help answer any questions you have and get you financed with the best loan for your. Feel free to reach out to the team at North Star Mortgage Network in Jacksonville, FL today!