What Is A Bridge Loan?
Simply put, a bridge loan can be defined as a type of financing that (a) is short-term in nature, (b) offers quick access to cash flow, and (c) helps to solve pressing liquidity needs. Both individuals and companies can apply for such a loan, provided they meet specific requirements.
As the name suggests, bridge loans provide access to interim financing until the individual can sign up for traditional, long-term, and permanent loans with lower interest rates. Once the individual’s permanent loan request is approved, they can use a percentage of it to pay their bridge loan lenders back.
Such loans are beneficial for commercial real estate investors who’d like to seal the deal on a lucrative property before their competitors but need more time to acquire the necessary funds. Entrepreneurs also fall back upon bridge loans to cover their payrolls, operational costs and to capitalize on opportunities knocking on their doors until they can raise funds through equity financing. It can also be a blessing in disguise in emergencies, for instance, when you face foreclosure on your property and require urgent cash to save it.
Wondering how long does it take to get a bridge loan? Also called swing loans, these require less documentation and are approved in 2-3 weeks, depending on the bridge loan lender you have chosen for your urgent financing needs.
How Do A Bridge Loan Work?
After covering the definition and basics of bridge loans, let’s talk about how this form of gap financing arrangement works. If you apply for a residential bridge loan, one of the two examples may fit your bill:
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- First mortgage bridge loan: In this scenario, you are thinking about downsizing your home. To achieve this goal, you need to pay off the remaining amount of your home mortgage as soon as possible and have enough to place a downpayment for the smaller condo you’re interested in. This is where a non-QM lender like SYLA Lending can help. After you are done ticking off your mortgage from your list, the bridge loan assumes the position of primary mortgage till the time you find a buyer for your old property to pay it off.
- Second mortgage bridge loan: This case involves procuring a bridge loan to make your new home’s down payment in time. It might be covered by your current home, which is why it is named second mortgage bridge loan.
These loans require collateral of some kind, for instance, real estate, debentures, or inventory. Did you know that you can get financing of up to 80% on your existing property while applying for a bridge loan? Moreover, you may also have the option to deliver interest-only payments for a specified amount of time.
If you are interested to know whether signing up for a bridge loan is viable for you or your business,
contact SYLA Lending’s experts or just drop a message!
Advantages Of Bridge Loans
In addition to the process being less time-consuming than traditional loans, short-term bridge loans bring with them a wide variety of benefits for their end-users. In the long run, this approach saves time, and in many cases, money.
- Property developers may apply for a bridge loan to finance the initiation of a new project while they await the necessary permits that open doors to conventional loans.
- Investors may end up getting great deals on their real estate purchases by completing the closing process in less than a month. The key to this? Bridge loans.
- Individuals looking to relocate are saved from the trouble of having to move multiple times and also from being forced to rent for a few weeks.
- With bridge loans, you can find a new place and pay for its down payment while simultaneously looking for prospective buyers for your existing property.
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Eligibility — How To Qualify For A Bridge Loan?
Different lenders may have varied qualification criteria for bridge loan seekers. Mostly, bridge loan lenders need you to own a minimum of 20-30% of your home’s equity. They also study your region’s housing market to predict the time it will take for you to sell your existing home. In addition to this, they also examine your creditworthiness and whether you will be able to deal with multiple loan payments at the same time.
Where To Get A Bridge Loan?
SYLA Lending will find you the right bridge loan option to fit your needs. Our mission is to make non-QM lending a hassle-free process. Do you need help applying? Want to know whether you can be eligible for a bridge loan with bad credit? Unsure if this is the right financial instrument for you? Our experts are here to answer your questions and walk you through everything! Give us a call today.