BRIDGE LOANSShort-Term commercial loans for time critical and difficult financing situations. Bridge loans are secured by commercial real estate and based on the unencumbered property value and its marketability. Debt ratios or borrower's credit and incomes are typically not taken into account based upon the loan-to-value. They can give investors time to solve whatever problems are preventing them from qualifying for permanent financing or from selling their properties. The duration of these loans typically ranges from a few months to a few years.The borrower overlook can easily overlook the economic gain that comes with these loans' flexibility because many investors are hesitant to use bridge loans because these loans often come with a higher price tag than permanent debt. Most property types are considered. Use of funds can be for most any purpose such as purchase, refinance and construction. One of the most-common uses for a bridge loan is to reposition an asset. They also often have limited or no prepayment penalties. As such, a borrower can increase cash flow quickly to refinance and receive permanent rates on their higher leverage amounts. If the borrowers obtained permanent financing based on their original cash flows, they would have to pay a significant prepayment penalty. BenefitsQuick CloseIn real estate investing, timing is everything. In real estate investing, timing is everything. If time is all your clients need to turn a bad situation into money, a bridge loan may just be their best option. Minimal Paper Work Creative Financing They may need to satisfy a 1031 exchange, prevent a foreclosure or bankruptcy, or take advantage of a fire sale. allow borrowers to achieve higher leverage. This is because bridge lenders may be willing to underwrite to lower debt-service-coverage ratios (DSCRs). They do this when they believe that the borrowers' business plan will increase the revenue from the property and increase the DSCR in future years. |
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