what is a bridge loan : Do You Need One ?

2008-05-22 15:32:36

( Telephony )



You might know what an ethernet bridge is, but do you know what a bridge loan is? So what is a bridge loan?

What is a bridge loan?
Also known as a swing loan, a bridge loan in the financial industry is a certain kind of loan over the short-term. This is typically taken out for a couple of years to finance projects.

What is a bridge loan as related to the real estate industry?
They are used in various cases:
- commercial real estate purchase
- retrieve real estate property from foreclosure
- to close on a property quickly
- even to make the most of a short-term opportunity for financing to secure financing in the long-term.

The biggest asset of a bridge loan? Speed.

A bridge loan is also like a hard money loan. The primary difference? A hard money loan has to do with a distressed situation or property.

A bridge loan could simply be a loan at a higher or similar interest which provides for an interim term financing (either for a business or individual) until further or permanent financing can be secured.

As an example?
As an investor you might only get a land loan that covers half of your property. With a bridge loan you can get extra funding for the permit phase. The construction loan is usually issued only after the issue and approval of permits.

Finally, the traditional mortgage is issued. This happens only after the issue of the certifications of completion by the local building department.

As an example?
Maybe you want to convert a complex of apartments into a condo. But the bank will only give you the money after 5 months. This is when you would take a bridge loan – in this way being able to finance your project in the interim.

You can also fund a bridge loan with hard money loans. Consumers also use bridge loans to buy real estate. In corporate finance they are used to avoid being without funds which you are between larger securities offering.

As an example
You might be purchasing a new home and plan to finance the down payment from the sale of a home you own currently. The sale of the home you own currently will not come through until after the sale of the new residence closes. By taking out a bridge loan as a down payment for the new home – on the assumption that the sale of your present home will close shortly and you can repay your bridge loan.


All rights Reserved © Tradenet Services srl
Do not duplicate or redistribute in any form.