Bridge Loan Basics
While some home or business owners are buying or selling a property, there are others who are doing both at the same time. If you’re in the latter category, you might also plan on using the money you’ll make from selling your commercial or residential property to buy a new property. When you need extra capital to cover expenses between projects, or to cover more immediate costs while larger financing is still in the pipeline, bridge loans are a smart solution.
One of the first things to know about a bridge loan is that it’s a short-term loan (lasting for a few months for a full year) applied for at a bank or with a mortgage lender. In regards to the repayment structure, bridge loans come with back-end interest payments you take care of with a lump sum, payments made upfront or regular monthly payments like you might already make with your current mortgage.
In regards to the inner mechanics of this type of financing, you can take out a loan to cover what you owe on your current home or business, factoring in the origination charges and fees as well as the closing costs. You’d want to ensure you also take out enough to take care of the closing fees and costs of your new property as well as the property’s down payment.
Once you’ve successfully moved into your new space, you’d have a new mortgage as well as bridge loan payments. Many commercial real estate investors roll the amount of the bridge loan into the larger financing and use the latter to repay the former, as there are no prepayment penalties with bridge loans.
Additional Facts to Know
Bridge loans are easy to secure, and the fast processing times mean you can quickly cover any gaps in capital you might have. Bridge loans are typically used for fix and flip projects, as well as renovations to existing properties.
Interim Capital Lending Solutions specializes in bridge loans for commercial real estate projects of all shapes and sizes. Contact our offices today to learn more about bridge loans and all of our commercial real estate financing options.