When you are selling one home and buying another, it can be challenging to coordinate the sale and purchase, especially if there are several offers in both contexts. Bridge Loans are a way to address the gap between the closing date for your old home and the finalization of your property purchase. The underwriting process for short-term bridge loans often differs from conventional loans. At RTI Bridge Loans, our Los Angeles bridge lending professionals can advise you on whether obtaining a bridge loan may be a good solution.
Table of Contents
- » What are Real Estate Bridge Loans?
- » How Do You Qualify for a Real Estate Bridge Loan?
- » Types of Real Estate Bridge Loans
- » Advantages of Real Estate Bridge Loans
- » Why Choose RTI Bridge Loans
- » Let Us Help You Bridge the Gap
What are Real Estate Bridge Loans?
Bridge loans are short-term loans that provide temporary financing until a more permanent form of funding presents itself. Often, they are used to finance the purchase of a new property while waiting for another piece of property to sell. Real estate developers and homebuyers use bridge loans for several reasons, including but not limited to the following:
- Acquiring a property before refinancing to conventional financing or selling the property
- Acquiring a property to improve credit and then refinancing
- Acquiring or refinancing a property while leasing up
How Do You Qualify for a Real Estate Bridge Loan?
Most Los Angeles hard money lenders will analyze your financial ability to repay the loan for you to qualify for a bridge loan. Generally, you can be eligible for a bridge loan if you qualify for a mortgage to purchase a new home and the required equity in your first home. When used for real estate, you must usually pledge your current home or other assets as collateral to secure the debt.
Your lender will look at some basic details to qualify for a bridge loan. Be prepared with the following:
Information about the project:
- Property type
- Acquisition cost
Information about yourself:
- Experience with similar projects
- Job and stated income
- Other real estate owned
- Rental income (for rental projects)
- Credit score – Remember that low credit isn’t a barrier to getting a loan. We’d like to understand how you manage your finances.
Types of Real Estate Bridge Loans
There are several types of bridge loans, so you must be specific when searching for and communicating your loan request to lenders.
Commercial Real Estate Purchase with Renovation
If you plan to renovate the property immediately after the purchase, and you need the loan to include the renovation budget, the terminology you use will vary depending on whether the property is residential or commercial.
For larger commercial real estate deals worth over one million dollars, lenders typically use the term “value-add” to describe loans with a renovation budget. So if you want this kind of loan, you should specify the value-add part because many commercial bridge lenders don’t include renovation costs.
Residential Investment Purchase with Renovation
Don’t call it a bridge loan if you’re seeking short-term financing for a residential real estate development deal that includes renovation and reselling. You can call it a “Fix and Flip” or “Fix and Rent” loan, depending on the exit strategy.
The same applies to ground-up construction financing. Instead of calling it a bridge loan, call it what it is and include the asset class to be more specific—for example, an SFR ground-up construction loan or a Multifamily ground-up construction loan.
Property Exchange Bridge Loans
Another bridge loan scenario that significantly differs from the ones mentioned above is the “buy before sell.” For example, let’s say you want to purchase a new property by using the equity in a property you plan to sell, but you have to buy before selling. You can use a bridge loan to buy a new home first, and then once the old house sells, you can use the funds from the sale to pay the bridge loan. This is sometimes called a reverse 1031 exchange in commercial and investment property deals.
Refinance Bridge Loans
You don’t need to use a bridge loan for real estate development. Several scenarios need short-term financing. Maybe you want to cash out equity to use for another investment. These bridge loan scenarios are usually known as “refinance bridge loans” or “equity cash-out bridge loans.”
Repaying Your Real Estate Bridge Loan
While most people pay off their bridge loan with money from selling their current home, several other repayment options exist.
Bridge loans may be structured in several ways, but they commonly feature a balloon payment towards the end, where the total amount is due by a specific date. Bridge loans typically must be repaid within 12 months or less.
Advantages of Real Estate Bridge Loans
If you’re looking for short-term financing, a bridge loan for real estate could be just what you’re looking for. Here are six reasons why this lending option is worth considering:
- Bridging loans can be arranged quickly
- Bridging loans can allow you to profit from property
- There are often no monthly repayments
- Bridging loans are very flexible and can suit your circumstances
- Bridging finance can make your life easier, especially if you have a pressing financial matter
- Bridging loans can prevent financial loss
Alternative financing options for real estate, such as home equity loans and home equity lines of credit (HELOC), exist. As with all types of loans, there are several pros and cons of bridge loans. However, a bridge loan remains on top if you need a lump sum urgently.
Why Choose RTI Bridge Loans
Investors frequently choose RTI Bridge Loans as their short-term financing partner in the Los Angeles Area because of our:
Impressively Low Rates
While a bridge loan for real estate usually attracts higher fees than traditional loans, RTI Bridge Loans offer some of the industry’s most competitive hard money interest rates.
Flexible Term Lengths
RTI Bridge Loans offers varied term lengths to ensure you can find a short-term financing loan that works within your real estate development timeframe.
At RTI Bridge Loans, we make acquiring a bridge loan for real estate development quick and easy with a straightforward process.
At RTI Bridge Loans, we strive to keep every client happy each step of the way. Our bridge loan experts are friendly, knowledgeable, and always willing to answer any questions!
Some of our competitors in Los Angeles charge very high-interest rates and hidden fees. At RTI Bridge Loans, your deal will end like it began – with a competitive rate, no hidden fees, transparent pricing, and no surprises.
Let Us Help You Bridge the Gap
Are you ready to work with one of the best commercial lenders in the Los Angeles Metropolitan Area? With decades of industry experience, the team at RTI Bridge Loans understands what it takes to succeed and can tailor a program to meet your needs!
Whatever your strategy and needs, contact RTI Bridge Loans, and we’ll help with the right hard money refinance based on you and your project. Call (562) 857-2285 or fill out our form to learn more about our Los Angeles bridge lending services.