A bridge loan is a type of loan used for short-term financing. Bridge financing typically has a term from 6 to 24 months. Bridge loan rates are higher than traditional institution loans due to the increased risk.
We do check your creditworthiness, but your approval will not be based on just credit since the property itself will secure the loan. This is beneficial for borrowers who may currently have less than ideal credit but have equity in the property.
These loans have a lower loan to value (LTV) ratios than traditional mortgages obtained from banks in order to protect the lender from a borrower defaulting. The bridge loan lender will generally only allow for a loan to value ratio from 50% to 70%. The loan amounts available for a bridge loan can range from a relatively small amount of $100,000 to a jumbo bridge loan in the millions of dollars. The borrower may sell the property or arrange other long-term financings in order to pay off the loan.
