What is a Bridge Loan?
Property owners and real estate investors may find themselves in a position where they require a short-term loan, or bridge loan. Below is some basic information how bridge loans work and who can benefit from them.
What is a Bridge Loan?
Property owners can use a bridge loan to tap into the equity of their existing property in order to make a down payment on a new property, while waiting for their existing property to sell.
Unlike many other types of loans, bridge loans are short-term loans, meant to provide quick financing and are to be paid back in a short amount of time, usually in six to twenty-four months. Some bridge loans are even expected to be repaid in just a couple of weeks.
Similar to traditional loans, you can expect the terms and conditions of a bridge loan to vary widely depending on which lender you choose. The same is true of the lending requirements. Many bridge lenders don’t have set requirements on minimum credit scores or debt-to-income ratios. However, the borrower must have sufficient equity in their existing property and/or a sizeable down payment must be made on the new property they are purchasing in order to qualify for a bridge loan.
Bridge Loan Mechanics
There are two ways bridge loans are typically structured. First, new debt is simply added to the borrower’s existing debt on the existing property they are intending to sell. The second structure involves the bridge lender paying off the borrower’s first mortgage of their existing property and lending additional funds to purchase a second property.
When it comes to interest payments on a bridge loan, some lenders will require payments to be made monthly, while other lenders will require lump-sum payments upfront or at the end of the loan term.
Who Can Benefit from a Bridge Loan?
Bridge loans are especially beneficial for real estate owners who need funds quickly and/or can’t afford to wait for their existing property to sell. If you need funds to purchase an investment property or for business purposes, a bridge loan may provide the rapid liquidity required to close your real estate transaction.
While a bridge loan can give you access to quick capital, interest rates are high and can vary from 8% to 15% depending on various factors like credit score, location of the property, and the loan-to-value ratio of the loan. There are also lender origination fees (1% to 5% of the loan amount), in addition to closing costs.
Lastly, when considering a bridge loan, it’s extremely important to have a general idea when your existing property will be sold. If your property does not sell or is on the market for a long period of time, your loan may come due and your lender will need to be paid off. If you cannot pay off your lender, you may have to extend the term of your bridge loan, which would incur more costs. Furthermore, you may have to find another lender to pay off your loan and worse case, your property could be foreclosed upon if re-payment is not made.
Bridge Loans in San Diego and California
If you’re looking for a bridge loan in San Diego or in California, reach out to Wilshire Quinn Capital. Wilshire Quinn is a direct lender, not a broker, and has a long track record of financing commercial and non-owner occupied residential real estate.
Get started today by submitting your loan request or call 619-872-6000 to speak with a bridge loan expert.
Loans are made or arranged by Wilshire Quinn Income Fund, LLC (the “Fund”) pursuant to California Finance Lenders Law license #603J060. The information contained above is for informational purposes only and is meant to provide general background information on the Fund and its manager, Wilshire Quinn Capital, Inc. Any and all information is deemed reliable but is not guaranteed.
- Funding typically in 5-7 business days
Loan Amounts from $200,000 to $20,000,000
- Interest Rates from 8% to 10.5%
Loan Term: 3 – 24 months
Commercial & Residential (non-owner occupied) Real Estate
- Purchase, Refinance, Cash-out Refinance, Rehab, Blanket Loans
Foreign National Loans Available
About Wilshire Quinn
Wilshire Quinn is a San Diego hard money lender focused on short term bridge loans, secured by first trust deeds. The company is based in San Diego, CA with offices in Los Angeles and San Francisco. Wilshire Quinn typically funds loans for their customers in 5-7 days. Their successful track record is closely linked to their ability to make immediate lending decisions based on their highly disciplined underwriting approach. The company funds a variety of loans such as: refinance, purchase, blanket, rehab loans, 1031 exchange, partnership buyouts, and more. They originate hard money loans ranging from $200,000 – $20,000,000. Wilshire Quinn works with commercial and residential buyers nationwide.
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