What is a bridge loan?
In general, a loan that has a term of days to a few years is called a bridge loan. It applies to many uses of the loan proceeds including real estate rehab loans, purchasing a new home, equipment purchases and debt consolidation.
Private money lenders provide many types of bridge loans. In the real estate investment market these loans are used by investors and developers to acquire a property that will be renovated with the intention to sell for a profit or lease for a longer term gain. The concept of a bridge loan in this case is that this loan bridges the gap of time between the initial purchase and construction of the property to the leasing and placement of long term financing that will repay the bridge loan. The A short-term private loan secured by real estate used only for investment purposes (purchase and development of a property)
What is the cost of a bridge loan?
The size, rate, and length of the loan is determined by the borrower’s equity in the property, the volatility of the market and the borrower’s credit.