Bridge Loan FAQ
Could I apply for a long term bridge loan?
The purpose of a bridge loan is to hasten a purchase while another property is still up for sale, so bridge loans are limited to a term of up to one year. However, we may be able to help with other loan options for long term planning.
Could I apply for a bridge loan from a traditional bank?
Generally, traditional banks are not willing to offer bridge loans. As a hard money lender, we are equipped to offer these loans even though banks likely would not.
What will the interest rate look like?
Interest rates on consumer bridge loans vary, though generally being higher than in the case of a mortgage from a traditional lender. The specifics of your case will dictate the interest rate and fees we charge, but borrowers typically pay something in the range of eight to ten percent interest.
When should I apply for a bridge loan?
You’ll generally want to apply sooner rather than later. This way, you can make an offer on the intended purchase without depending on contingencies or a pending approval. This way, you can negotiate with more confidence.
How long does it take to apply and be approved?
It may vary depending on your situation, but generally, the process moves very quickly compared to other kinds of loans. Bridge loans are short term by design, and serve a very specific purpose, so there is every incentive to make the process a quick one. You’ll want to make sure you have all the documents we may ask for.
What should I have in order to apply?
Well— you need equity, of course. You’ll also want to have any of these applicable documents on hand, though you may not ultimately need all of them:
⦁ Pay stubs reflecting at least 30 days of income
⦁ Names and addresses for each employer over the past two years
⦁ At least one year of tax returns
⦁ W-2 forms for two years
⦁ Completed and signed 4506-T or 4506T-EZ forms, dependent on your mortgage banker
⦁ Proof of pension income, if applicable
⦁ Bank statements dating back two or three months
⦁ Social Security and Social Security Disability payments, if applicable
⦁ Year to date profit and loss statement and two years of signed returns, if self employed
⦁ Dividend earnings
⦁ Child support or alimony payments (optional, but may help our decision making)
⦁ Statements relating to any outstanding debts, including car loans, student loans, or credit card debt
⦁ Information on security accounts, including stocks, bonds, life insurance, et cetera
Of course, every loan is different and we could ask for more (or less) information in your case.
When will the bridge loan be disbursed?
Every case is different, but we try to have all approved loans disbursed within roughly 14 business days. It goes without saying that time is of the essence when it comes to bridge loans, so we try to keep things moving as fast as we can.
Hard Money Loans vs. Bridge Loans
Though a bridge loan can be considered a type of hard money loan, a hard money loan is not necessarily a bridge loan. A bridge loan and a hard money loan both require you to have equity in a current property, and use that property as collateral to secure a loan. However, these loans serve different purposes. A bridge loan is designed around the short term goal of facilitating a property purchase, while a hard money loan is more general in application. There are different types of hard money loans, of course. For instance, consider hard money loans for a primary residence.