Bridge Loans

The bridge loan is a form of financing that “bridges” the gap between funds needed now and when longer-term financing becomes available. It can be a key component in an owner’s long-term financing strategy, particularly for those faced with a here-and-now opportunity or other shorter-term situation such as improving or selling a property.

Bridge loans are similar to hard money loans in that both can be quick to close. Both may be needed for a short period of time. In addition both undergo limited or less severe underwriting processes. However, while the bridge loan investor requires a definite exit strategy, the hard money lending source may not. Moreover, bridge loans frequently have a loan to value ratio of 70-95%, whereas hard money loans will not exceed 50% LTV. The financing experts at Glenn Daniel CLB can sort out your situation and quickly align you with the appropriate type of bridge loan lending sources and related investors.

Real estate owners often use a bridge loan to purchase a second property before the sale of the first property closes. Then the proceeds from the sale are used to pay off the bridge loan. This illustrates the important “exit strategy” borrowers must have before an investor makes a bridge loan. In this example, the investor would need to see a signed sales agreement spelling out where, when, and how the bridge loan will be repaid.  Bridge financing almost always needs to be arranged and closed quickly. Such loans tend to be for 6 to 12 months with a possible 12-month extension. They are usually structured as simple interest only loans with no pre-payment penalty and all principal due in full at maturity. Risk to the investor is minimal since the loans are underwritten based on existing equity in the property and the exit strategy is defined.  Because of the owner’s need for timeliness, banks and other institutional lenders are not usually effective when it comes to bridge loans. That’s why Glenn Daniel CLB has access to private equity groups, mortgage pools and other sources of private capital capable of making swift decisions.

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