A bridge loan is short-term, asset-based financing used when speed matters or when a property cannot yet support long-term financing. It exists to solve a timing problem.
These questions cover how bridge lending works and when it fits.
Quick answer
Bridge loans are short-term financing, typically 6 to 24 months, secured by the property and underwritten on the asset and exit plan rather than personal income. They cost more than long-term financing because they solve a timing problem.
Frequently Asked Questions
What is a bridge loan?
Short-term financing secured by real estate, used to acquire or hold a property until longer-term financing or a sale is achieved.
How long are bridge loan terms?
Commonly 6 to 24 months, often with extension options at additional cost.
What do lenders evaluate?
The property, the deal numbers, and your exit strategy. Personal income documentation is generally not required.
When would I use one?
Competitive purchases requiring speed, properties needing work before they qualify for long-term financing, auction acquisitions, and situations where timing does not permit conventional processing.
Why are bridge rates higher?
Short terms, faster closing, and properties that often fall outside conventional criteria all increase risk. Pricing reflects the speed and flexibility you are buying.
How fast can a bridge loan close?
Faster than conventional financing, though no lender should promise a specific date without seeing the file. Appraisal and title still take time.
Is a bridge loan the same as hard money?
The terms overlap heavily. Bridge often implies bridging between transactions while hard money describes the lending style, but in practice many products fit both descriptions.
Can I use a bridge loan to buy before selling?
Yes, and it is a common use. Bridge financing lets you acquire a new property before your existing one sells.
What is the exit strategy?
How the loan is repaid — typically a refinance into long-term financing or a sale. Lenders assess how credible your exit is when pricing the loan.
What happens if I cannot exit on time?
Extension fees, which are expensive, or in a poor scenario a forced sale. This is the primary risk in bridge lending.
Are bridge loans interest-only?
Frequently, which keeps carrying cost lower during the short term. The full principal is due at maturity.
Can I close in an LLC?
Yes. Entity vesting is standard on bridge financing, which is business-purpose lending.
What down payment is required?
It varies by deal, often expressed as a percentage of purchase price or of after-repair value depending on the structure.
Do bridge loans have prepayment penalties?
Sometimes a minimum interest period rather than a percentage penalty. Check your documents so an early payoff does not surprise you.
What is a minimum interest period?
A provision requiring a set number of months of interest regardless of when you pay off. Common on short-term loans.
Can a bridge loan fund renovation?
Some bridge products include renovation funds through a draw schedule. Others fund acquisition only. Confirm which you are getting.
What documentation is needed?
Property details, purchase contract, your exit plan, entity documents, and evidence of funds for the down payment and carrying costs.
Should I have the exit financing arranged first?
Ideally yes. Knowing that your takeout financing is achievable before you take a bridge loan removes most of the risk.
How do I calculate whether a bridge makes sense?
Total bridge cost — points, interest over the expected term, and fees — against the value of moving quickly or accessing a property you otherwise could not.
What is the most common mistake?
Underestimating the timeline. Renovation, lease-up, and refinance processing collectively take longer than most investors plan for.
