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What Is a Bridge Loan?

A bridge loan is short-term financing (6–12 months) used to "bridge" a gap in funding—typically when buying a new property before selling an existing one, or securing a property while waiting for long-term financing approval. Bridge loans close quickly (1–2 weeks), provide immediate capital, and are repaid when you sell the property or secure permanent financing. They're common in real estate investing and commercial property transactions.

  • Short-term financing (6–12 months) for time-sensitive real estate transactions
  • Closes quickly (1–2 weeks) compared to traditional loans
  • Loan amounts typically 60–80% of property value
  • Repaid when you sell the property or secure permanent financing
  • Interest-only payments are common during the term

How Bridge Loans Work

1. Apply & Get Approved: Submit application with property details and exit strategy. Bridge loans approve quickly (1–2 weeks) because they're secured by real estate.

2. Receive Funds: Get cash to close on the new property or cover immediate expenses. Loan amounts typically 60–80% of property value.

3. Repay When Exit Occurs: Repay the bridge loan when you sell the property, secure permanent financing, or refinance. Terms are short (6–12 months) with interest-only payments common.

Common Uses for Bridge Loans

  • Buy Before Selling: Purchase a new property before your existing one sells
  • Fix-and-Flip: Acquire and renovate a property for resale
  • Waiting for Permanent Financing: Secure a property while long-term financing is arranged
  • Auctions: Close quickly on auction properties requiring fast funding
  • Time-Sensitive Deals: Act on opportunities that won't wait for traditional loan timelines

Bridge Loan Terms & Requirements

Typical Terms: $100k–$5M+, 6–12 months, 8–15% APR, 60–80% LTV, interest-only payments common.

Requirements: Property as collateral, clear exit strategy, 650+ credit score, 20–40% down payment, property value/appraisal.

Pros and Cons

Advantages: Fast approval, flexible terms, interest-only payments, enables quick transactions.

Considerations: Higher rates than conventional financing, short terms requiring a clear exit strategy, risk if property doesn't sell or refinance as planned.

Frequently asked questions

What's the difference between a bridge loan and a DSCR loan?
Bridge loans are short-term (6–12 months) for immediate needs. DSCR loans are long-term (15–30 years) based on rental income.
Can I extend a bridge loan if I need more time?
Some lenders allow extensions (usually 3–6 months) with additional fees, though bridge loans are designed as short-term solutions.
What happens if I can't repay the bridge loan?
The lender can foreclose on the property since it serves as collateral.

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