Bridge loans are an incredibly useful tool that investors can utilize to close on properties faster, especially in scenarios where traditional financing limitations may hold them back. Besides speed, these loans offer unmatched flexibility which allows investors to use them for a larger variety of deals. As a broker or lending partner, understanding the power of bridge loans allows you to close more deals and better serve your client base. Adding these programs to your loan offerings enables you to solve more of your client’s financing problems and become a crucial part of their investment team.
Continue reading as we break down the key aspects of bridge loans, why they are essential for investors in today’s market, and how brokers can benefit from utilizing these programs.
A bridge loan is a type of short-term financing offered by private lenders who operate in the real estate space. They are commonly used to quickly acquire properties in competitive markets or “bridge” gaps in an investor’s finances, such as acquiring a new property before selling an existing one. Aside from having a shorter term, bridge loans differ from traditional mortgages because they are asset-based in terms of approval and loan collateral. Qualifying for a bridge loan is less about personal credit, and more about the value of the property being financed and whether it makes good financial sense. This allows bridge loans to be approved faster, and borrowers may still be able to qualify for financing with less than stellar credit or non-W2 income.
The advantages bridge loans provide to investors allow them to win more often than when only using conventional loans. They offer unmatched speed, with a streamlined approval process that can deliver funds in as little as 10 weeks. This speed allows investors to submit winning offers on competitive deals, and fund time-sensitive projects such as auctioned or foreclosed homes. Bridge loans are also very flexible, which means investors can use them for a wider range of deals, including home flips. They can even be used to save projects that have stalled due to insufficient fundings, providing the deal with the cash injection it needs to get across the finish line.
The benefits of bridge loans extend to a broker’s business too, though. Offering bridge loans allows you to attract more clients by providing them with financing solutions that can resolve complex deal roadblocks. This also lets you position yourself as a creative problem solver that can help investors win in competitive markets. It can even help you build more long-term relationships, leading to repeat business. Finally, bridge loans can be used to fund a wider variety of deals, with the potential to expand your client base to fix and flip investors and those in need of rapid acquisitions.
Let’s cover the key details brokers should know about bridge loans so you can confidently present them to clients. Loan terms range from 6 months to 18 months in duration, though lenders may be willing to extend the loan period to 24 months. They also typically have higher interest rates than conventional mortgages due to their short-term nature, which is why it’s important to discuss a viable exit strategy with clients. As we mentioned, loan eligibility is based on the property itself rather than the borrower’s personal credit profile. However, having good credit or experience with real estate investing may lead to better terms with a given lender.
How can brokers close more deals with bridge loans? To start, partner with a trusted lender who offers bridge financing. Be sure to look beyond the lender’s terms: search for customer reviews and see what resources they offer to broker partners that can help you find success. You want a loan partner that can offer both you and your clients a great experience. Next, take a look at your existing client base and see which clients might benefit from a loan that offers shorter terms or can help them make faster acquisitions. Bridge loans are also a great transitionary loan, so it’s important to maintain communication once a loan has closed. Many of these same borrowers will return to seek out long-term refinance, giving you more business.
To help your clients maximize the returns on their next investment, partner with a lender that can provide you with the best leverages and rates. RCN Capital lends to real estate professionals, commercial contractors, developers & small business owners across the nation. We provide short-term fix & flip financing, long-term rental financing, and new construction financing for real estate investors and lending partners. If you are looking to offer bridge financing to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.