3 Great Ways To Find the Best Bridge Loans
Real estate investors, such as those who flip properties or who purchase multi-family dwellings, may have the need for a bridge loan. This type of loan is typically used when borrowers can’t get approved for a conventional loan. It can be considered a short-term loan that allows extra time for a borrower to improve his financial situation to later apply for, and receive, a permanent loan. There are things to consider when looking for bridge loans. Here are three great ways for borrowers to find the best loans.
Before accepting an offer for a bridge loan, borrowers may want to review the fees and penalties associated with the loan. It can be a common practice for lenders not to charge prepayment penalties for bridge loans. Therefore, if a lender does charge a prepayment penalty, it may not be the best loan. The amount of origination and brokerage fees may also be considered when choosing bridge loans.
Make Sure the Lender Specializes in Bridge Loans
The requirements for these types of loans can be more complicated than conventional loans. Therefore, borrowers may want to find lenders with sufficient experience working with bridge loans. Borrowers may also prefer lenders with specific expertise in commercial real estate in order adequately evaluate the current and potential value of the subject property. These loans can be found at banks, through commercial mortgage brokers, or from private investors.
Make Sure the Advertised Fees Are Consistent With the Lender’s Practices
Borrowers may need to make sure that any potential lender is willing to share information upfront regarding the terms of the bridge loan. This should include a comparison of what the lender is advertising to what the lender actually offers. If lenders advertise extremely low rates but later tell buyers that they do not qualify for those rates, buyers should be careful to make sure that the low rates that are advertised are not simply gimmicks to lure business to the company.
Bridge loans may cover a duration of six months to one year. During this time, the borrower may only be responsible for making payments on the interest for the loan, but the interest rate may be much higher than that of a conventional loan. At the end of the term, the borrower may qualify for a long-term conventional loan, or may have made sufficient improvements to the property that will enable him to sell it for a profit after satisfying the debt from the bridge loan.