What is a private money bridge loan?
Let’s break down what private money bridge loans are, how they function, and why they’re valuable in real estate financing.
Private money bridge loans are short-term financial options mainly used in investment real estate deals. They’re called “bridge” loans because they bridge the gap between a borrower’s immediate and long-term financing needs.
Instead of traditional lenders like banks or credit unions, private money bridge loans come from non-institutional sources. These could be private lenders, investors, or groups, not big financial institutions.
How They Work:
These loans are simpler and quicker than traditional ones, both in structure and application process.
Short-Term:
Bridge loans usually last from 6 to 36 months, most commonly around 6 to 18 months. This lets borrowers quickly get financing for real estate transactions like buying, refinancing, building, or flipping properties.
Quick Approval and Funding:
One major perk of private money bridge loans is their speed. They’re usually processed and funded much faster than regular loans, often within days. This is crucial in fast-moving real estate markets.
Secured by Collateral:
These loans are backed by the property itself. This makes lenders feel more secure and reduces their risk. Because the loan is based on the property’s value, it’s easier for some borrowers to qualify, even if they’re self-employed or have less-than-perfect credit.
Higher Interest Rates:
Private money bridge loans often have higher interest rates because they’re seen as riskier. Lenders might also charge borrowers points, which are additional fees based on a percentage of the loan amount. But borrowers accept these costs for the loan’s speed and flexibility.
Why Use Them?
Private money bridge loans are popular because they’re flexible, fast, and accessible to more people. They’re customized to fit individual needs and schedules, helping investors make the most of opportunities quickly and maximize returns.
In Conclusion:
Private money bridge loans are powerful tools for real estate investors. They help secure capital for time-sensitive deals, empowering borrowers to seize opportunities and meet investment goals. Whether you’re a seasoned investor or new to real estate, understanding these loans can boost your success in the field. Contact Seth Swenson Capital to discuss how a private money bridge loan may help you achieve your goals.