Acquiring a loan to finance the purchase or renovation of real estate has become common in this generation. However, different types of real estate funding have varying factors, such as interest rates, requirements for qualification, loan amounts, and repayment periods. In this article, you will learn more about commercial bridge loans. As the name suggests, this is a temporary form of funding for urgent real estate opportunities. Read through it to get a better understanding of these loans and how they function.
Explaining Bridge Loans
From its name, this type of funding is used to solve an urgent financial need while you work on a more affordable long-term financing solution. However, most borrowers get confused because the name ‘bridge’ describes how bridge financing is used without giving any specific characteristics about the loan itself. This implies that any commercial loan can be described as a bridge loan if used in a particular way.
However, these types of loans are specifically designed to fund a property purchase or renovation while you are in the process of getting longer-term financing. If you are not an investor in the real estate industry, you can use a bridge loan to ‘fill the gap’ between buying a new property and selling your current home. That is why the other name for these loans is gap financing.
Facts About Bridge Loans
There are a few characteristics that create the distinction between a bridge loan and other types of financing, as explained below:
To qualify for a bridge loan, you will be required to use your property as security.
The property’s value determines the maximum money you get from this type of funding after the lender has assessed its after-repair value ratio or loan-to-value ratio.
These loans have higher interest rates than the typical bank loans because they are quick business loans.
You can acquire a bridge loan from a bank or alternative, online, and private lenders, such as hard money lenders.
Bridge loans are interim funding, which implies that their terms are on the shorter side. You can get between a few months and a year to fully repay the loan.
Bridge loans have been there for a while, but not many people understand how they work. Contact Lionheart Commercial Capital for more details and to get the best real estate financing.