Bridge Loans: Covering Your Immediate Expenses for Large Transactions
As an investor, you’re already aware that the perfect investments always seem to arise at the most inopportune moments. Opportunities tend to present themselves when you don’t have the cash on hand to take advantage of them, forcing you to miss out and simply wait for the next one to come around. However, you don’t have to deal with these issues anymore thanks to bridge loans. These loans are designed specifically to help you make large transactions necessary to purchase commercial properties that you wish to invest in. Before taking the dive and getting one of these loans for yourself, it’s always a good idea to learn a bit about what to expect
Bridge loans are short-term loans that are designed to get investors like you the financial support needed to take advantage of investment opportunities that arise on short notice. Typically, a traditional bank loan or mortgage is going to take months to obtain, and while you’re waiting, other investors have the opportunity to snatch the commercial property away. Bridge loans can be obtained in as little as a week and don’t have nearly as many credit requirements. Because they are riskier for lenders, the commercial property you’re borrowing the cash for will be used as collateral, meaning that’s what you’ll lose if you default on the loan.
The main thing to note is that bridge loans are not meant to act as permanent financing for your commercial purchase. They are only meant to assist you in the initial purchase of the asset, and are only meant to last until you happen to obtain more traditional financing from your bank or other lender. The loan terms for these particular financial arrangements typically last between 6 months and 2 years, which is typically enough time for investors to obtain a different type of financial support and pay off this initial loan.
Because these loans are meant to be short-term, they also have much higher interest rates than traditional loans. This is why you need to know you’ll be applicable for another type of funding later on before you apply for one of these loans initially. If you fail to obtain another loan, it will be rather hard to keep up with the interest rates of these loans and could result in the loss of your new property.
In past years, bridge loans have been seen as risky, but in the current market they certainly have some huge benefits for investors like yourself. To learn more about these loans and apply for one of your own, speak to your lender about the arrangement.