Whether you are an investor or are looking to buy a home for your family, you definitely need funding for your real estate project. However, sometimes you may be low on finances, and the best option is to look for other ways to earn money. One of the viable ways is acquiring bridge loans. These loans work differently from other loan types, as you shall see below. They are used to funding immediate opportunities, most especially in real estate.
How Do Bridge Loans Work?
These commercial loans come in handy when a mouth-watering real estate opportunity is laid out for you. Once you take advantage of such an opportunity using this type of funding, you can find more affordable and long-term financing or refinance an existing loan. However, the functioning of bridge loans is dependent on your tastes and preferences. Your real estate property will serve as collateral for this short-term funding.
The amount you receive from a commercial bridge loan lender will be determined by the property you want to buy, renovate, or acquire. In most cases, you will get 70 to 80% of the property’s value after the lender has assessed the loan-to-value ratio (LTV) or after-repair value ratio (ARV). Getting a commercial bridge loan from a bank will see you paying higher interest than you would for a typical bank loan.
What to Consider for a Bridge Loan
Like other loan types, you will consider the interest rates, fees, reputation of the lender, terms, and loan amount. However, with this particular type of loan, you may want to focus more on two aspects:
Funding Period
The time it takes to process this temporary loan is essential because you want the money to help you take care of an urgent expense. Alternative lenders are the best option since they process the funding faster than the banks.
Prepayment Discounts
A commercial bridge is a temporary form of funding. Therefore, you must ensure that your lender has some incentives if you pay off the loan within or before the set time frame.
Funding a real estate project can be tricky, but you have many options available, including bridge loans. Contact Lionheart Commercial Capital today to get all the financial help you need for your real estate project.
