Bridge loans are an incredibly powerful financing tool for investors, and brokers too can benefit from adding bridge loan programs to their product offerings. These short-term loans help investors fund projects when conventional mortgages don’t make the cut. Their emphasis on speed and flexibility means brokers can utilize these programs to help clients better navigate financing roadblocks.
Are you a broker or lending partner that’s looking to offer bridge loan programs to your clients? Continue reading for our quick guide on how bridge loans work, how they can help you close more deals, and how to introduce these programs to your clients.
Unlike traditional mortgages, bridge loans are short-term financing programs offered by private lenders rather than conventional lenders like banks or credit unions. They are secured by owned property as collateral, which is typically the property being financed. This allows them to be much more flexible in terms of borrower financials, speed of loan approval, and loan use cases. Bridge loans were originally designed to help borrowers “bridge” gaps in their finances. A common use case is purchasing a new property while in the process of selling an existing home. They serve a wide variety of uses, however, with their short-term making them perfect for renovation projects like home flips.
Bridge loans help brokers like you close more loans because they offer several advantages over standard mortgages. They can be approved much faster, with funds delivered in as little as two weeks, which is key in time-sensitive scenarios. Their flexibility means investors with complex income situations can still be approved for funding, and since they are secured by property, credit is less of a factor in loan approval.
Bridge loans allow borrowers to place contingency free, all-cash offers on properties, making them more likely to win bidding wars. Bridge loans can also be used in a variety of scenarios, which allows you to help more clients get around financing roadblocks.
You should aim to present bridge loans as a solution that clients can turn to for their more unconventional financing problems. Most investors aren’t familiar with bridge loans simply because they haven’t heard of them or they don’t understand how they work. As a broker, identifying scenarios that call for bridge loans is part of the services that you offer. Present all the possible options to your client, including bridge loans, and cover the pros and cons of each solution. You can build trust and start long-term business relationships by taking time to educate clients on loan specifics, and how they might differ from conventional financing.
So, what are some of the best examples of when to use a bridge loan? Investors often use them for covering gaps in their finances, like when selling a property. A bridge loan allows borrowers to make a new acquisition, while also giving them time to repay the loan afterwards.
We mentioned earlier how their shorter loan period makes bridge loans ideal for renovation projects like home flips. But they can even be used for value-add opportunities, like with updating a rental property to increase its cash flow. This might put owners in a better position to secure long-term funding, for example.
One of the main benefits of using a bridge loan is speed. This speed can help investors secure funding in time-sensitive scenarios, such as with auctions or foreclosures. You can also present bridge loans as an opportunity for investors looking for good deals to expand their search areas.
Working with the right wholesale lending partner will make all the difference for bridge financing. A trusted partner will have experience in the real estate lending space, and understand the importance of speed and responsiveness when funding these deals. Avoid inexperienced lenders, and check customer review before selecting a lending partner. Look for those who offer broker-friendly loan programs, transparency in compensation structures, and good support for broker partners.
As you continue to build relationships with lending partners, you may gain access to resources that can streamline your loan process. This can include things like resources to help you market your product offerings, and a streamlined application process to get your deals funded faster.
The best way to save on a real estate investment is to obtain financing from 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 professionals. If you are looking to offer bridge financing programs to your clients, RCN Capital has competitive loan options and an award-winning broker referral program available to partners.