What Is a Bridge Loan?
Bridge Loans in Real Estate Transactions: A Strategic Transitional Financing Tool
A bridge loan, also known as interim financing, is a short-term credit instrument designed to provide immediate liquidity during transitional stages in the real estate investment cycle. It is commonly used when the borrower is in the process of selling a property and requires capital to acquire a new one. This type of financing helps bridge the temporal gap between the sale of one real estate asset and the acquisition of another.
Strategic Advantages of Transitional Financing
The main competitive advantage of a bridge loan lies in its ability to offer quick access to liquid funds, which is crucial for seizing investment opportunities or closing deals without depending on the prior sale of an asset. Common uses of the funds obtained include:
- Paying off existing liabilities.
- Financing relocation or moving expenses.
- Covering operational costs during the transitional period.
One of the most notable features is the speed of approval: in well-structured environments, financing can be approved and disbursed in less than 24 hours, making it an optimal solution for urgent liquidity needs.
Mechanisms for Accessing the Loan
Access to a bridge loan can begin with traditional financial institutions—such as commercial banks or credit unions—that often offer tailored products for these scenarios. However, it is also advisable to consider alternative sources of financing:
- Peer-to-peer lending platforms (fintech).
- Private lenders with expertise in real estate markets.
- Digital financial entities specializing in fast, automated financing.
It is essential to compare terms, interest rates, collateral requirements, and response times before making a decision.
Condiciones Generales
• Se requiere una tasación certificada por un profesional acreditado MAI o MRICS
• El tasador puede ser elegido por el cliente, pero debe ser aprobado por nuestro equipo
• No hay penalización por pago anticipado
• Los intereses no son reembolsables y deben pagarse por adelantado en cada extensión
• Nuestra hipoteca será siempre en primera posición
• El proceso de cierre puede completarse en 30 a 45 días, tras la visita al sitio y recepción de todos los documentos.
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Disponibles
1. Income-Producing Property Loans
Ideal for:
Investors who already own or are acquiring properties with rental income potential.
• Borrower: Special Purpose Entity (SPV)
• Personal Guarantee: Required only if DSCR is below 1.1
• Use of Funds: Fully unrestricted
• Term: 1 year, renewable up to 4 times
• Interest Rate: From 9.875% annually
• Upfront Costs: No due diligence fee, but site visits, legal, and technical costs typically range from $30,000 to $45,000
• Financing Fee: Between 4 and 7 points
• Maximum LTV (Loan-to-Value): Up to 75% of 180-day projected value
• Collateral: First mortgage + 100% of pledged shares + rental income assignment
• Interest Payments: Prepaid for the initial loan term
2. Rehab and Construction Loans
Ideal for:
Renovation or ground-up construction projects needing strategic leverage.
• Borrower: Special Purpose Entity (SPV)
• Personal Guarantee: Not required from main partners
• Use of Funds: Exclusively for the secured property
• Term: From 1 to 3 years (exceptions up to 5 years)
• Interest Rate: From 9.875% annually
• Upfront Costs: No due diligence fee; legal and technical costs range from $30,000 to $45,000
• Financing Fee: Between 4 and 7 points
• Maximum LTV: Up to 70% of 180-day projected value
• Collateral: First mortgage + 100% of pledged shares + general contractor agreement
• Interest Payments: Prepaid for the initial loan term
3. Vacant Commercial Land Loans
Ideal for:
Investors with land in strategic areas who need capital for development or refinancing.
• Borrower: Special Purpose Entity (SPV)
• Personal Guarantee: Not required from main partners
• Use of Funds: Unrestricted
• Term: 1 year, renewable up to 2 times
• Interest Rate: Starting at 9.875% annually
• Upfront Costs: No due diligence fee; estimated site, legal, and technical expenses between $30,000 and $45,000
• Financing Fee: Between 4 and 7 points
• Maximum LTV: Up to 60% of 180-day projected value
• Collateral: First mortgage + 100% of pledged shares
• Interest Payments: Prepaid upon signing
Key Features and Benefits
Swift Financing:
Get immediate access to the resources you need to secure acquisitions or capitalize on opportunities in the
global commercial market.
Adaptive Terms:
Designed to align with your investment
strategy and financial profile, offering operational flexibility.
Efficient Cost Structure:
Competitive interest rates that optimize
your financial burden.
Specialized Expertise:
Work with a team experienced in structuring and managing commercial bridge loans in various international markets.
Comprehensive Support:
Continuous guidance and technical support throughout the investment cycle, ensuring a seamless and efficient experience.
Bridge Loans: A Simple and Efficient Process
Explore how the Summit Bridge team optimizes the bridge loan procurement process through an efficient, investor-centric methodology. Through a structured approach, we evaluate each application using rigorous technical parameters, allowing us to identify the most appropriate financial solution for each case. Our credit structuring expertise ensures expeditious and informed access to the necessary capital, facilitating strategic implementation at every stage of the real estate project, from acquisition to development or asset stabilization.
A bridge loan represents a tactical solution within a real estate investor’s financial architecture, offering flexibility, speed, and temporary liquidity coverage.
While it is not a universal option, its proper implementation can prevent the disruption of asset strategies or the loss of acquisition opportunities. It is recommended to conduct a cost-benefit assessment with a financial or mortgage advisor to determine if this instrument is appropriate for the specific structure and objectives of the investment project.
