Within the private financing sector, savvy real estate investors leverage capital sourced from asset-based loans to effectively grow and scale their business operations. Asset-based mortgages are secured by the underlying property, allowing lenders to close more expediently than traditional loans and with a fraction of the paperwork. A popular form of asset-based lending is a bridge loan, which enables investors to diversify their real estate portfolios to optimize returns. The lending experts at Express Capital Financing have been assisting successful investors, property developers and business owners in obtaining the money they need to prosper for decades and have drawn on this immense experience to provide the following overview of bridge financing to help you determine if it is the right solution for your next real estate project.
What is a Bridge Loan?
Bridge loans are extended for a compressed time window compared to longer-term financing or conventional loans, usually ranging from one to two years. Investors prefer the flexibility and absence of burdensome paperwork associated with obtaining bridge financing. These short-term loans can often be extended for additional periods which is a tremendous advantage for property developers handling construction or renovation projects where there are often unexpected delays that require extra time.
The majority of traditional lenders do not offer bridge loan products for borrowers. However, this type of gap financing is ideal for real estate industry scenarios such as when an investor wants to quickly make a real estate purchase while they are also still waiting for their current buy to let property to be resold. The good news is that private money lenders like Express Capital Financing specialize in providing modern bridging loans for a wide variety of real estate projects.
Key Advantages of Bridge Loans
Bridge loans provide a wide range of advantages. Perhaps the most well-known and significant competitive edge this type of interim financing plan offers investors is the speed in which the underwriting phase of the application process can be completed. In the ultra-competitive current market, any form of delay when it comes to funding can be all the difference between losing out on a profitable investment property and successfully acquiring it. The ability to quickly submit offers with the requisite liquidity to back it up gives investors an enviable leg up over the competition, allowing them to lock-in deals much easier.
For real estate professionals who have not yet established permanent financing or for self-employed investors, modern bridging loans are an ideal funding option compared to longer-term financing. Express Capital Financing conducts a comprehensive, common-sense approach to its underwriting process, basing our funding determination primarily on the long-term viability of the proposed transaction as opposed to strong credit history or salary thresholds. Put simply, if it is a good deal, we are committed to making it happen and will work with investors and private companies to develop effective, individually tailored financing plans that address their specific needs.
Another plus associated with this type of asset-based lending is that investors can use the capital for a wide range of uses beyond just the initial acquisition of the property itself. Whether you need additional working capital to maintain business operations between deals or cover vital business expenses, bridge loans provide investors and business entities alike with the necessary amount of liquidity to be successful in the real estate market. And when you choose to partner with Express Capital Financing, you have the autonomy to pay off your current loan balance before the maturation date without incurring any sort of adverse penalties or fees like you would with conventional bank mortgages, so you can quickly move on to your next income-generating endeavor.
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Ready to expedite the growth of your investment business with efficient, affordable bridge loan funding products? Express Capital Financing is here to help. Contact us today to learn more about how we can assist you in reaching all of your investing goals!
FAQ
Bridge loans are typically used when a real estate investor needs short-term financing for a property purchase or renovation. These loans are usually sought when the investor does not have the cash flow on hand to close the deal but wants to take advantage of an opportunity before it passes by. Bridge loans can provide quick funding, allowing investors to act fast and get the best possible price on their purchase
Bridge loans, also known as gap financing, swing loans, and interim financing, are usually used to purchase or renovate a property for resale or refinance an existing loan. Bridge loans provide the necessary capital to bridge the gap in financing between the purchase and sale of a property.
An 80-10-10 loan is a type of bridge loan that is designed to provide short-term financing for real estate investors. This type of loan allows the borrower to access funds quickly and usually requires minimal documentation and paperwork.
The interest rate on a bridge loan varies depending on the amount being borrowed, the lender and borrower’s creditworthiness, the current market conditions, and other factors. Generally, bridge loan rates are higher than traditional mortgages or home equity loans because they are short-term financing solutions and typically require more risk for lenders.
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Bridge loan interest rates range from 6% to 12%, depending on the specific loan terms and applicant qualifications. Be sure to discuss all the details of your loan with your lender to understand exactly what interest rate you will be charged.
Bridge loans can be expensive and risky, as they typically come with higher interest rates and shorter repayment terms than traditional personal loans or other long-term financing. Borrowers should carefully consider the costs and risks associated with the loan terms before committing to one. Additionally, borrowers should make sure they have a solid plan in place to make sure they have a solid plan in place to meet their monthly payments to ensure the money loan is paid back on time and in full. Failure to do so could lead to significant financial losses.
Qualifying for a bridge loan is fairly straightforward, and the process is usually quite simple. In general, the borrower must have good credit and enough equity in their current property to secure the loan. Generally, lenders require that borrowers have a credit score of at least 680 and provide evidence of income such as pay stubs or tax returns to demonstrate their ability to repay the loan over a specific period of time.
Borrowers must also provide evidence of the value of the property they are borrowing against. This can include an appraisal or a comparative market analysis, depending on the lender's requirements.
