Commercial bridge loans are a short-term financing solution that's widely used within the real estate industry. Real estate developers and investors use these loans to "bridge" a gap when purchasing or renovating a wide array of properties. Even businesses in other industries may take out a commercial real estate bridge loan if they purchase a new property.
Commercial Bridge Loan Highlights
Eligible Properties: Multifamily, Office, Retail, Hospitality, Industrial, and Student and Senior Housing in strong markets
Loan amount range: Minimum $1,000,000
Interest Rate: 5% or higher over index
Loan Term: 12 to 36 months. Extensions are possible
Amortization: Generally Interest-only with some exceptions
Maximum LTV: 80% of cost (LTC). Max stabilized LTV can vary, but generally up to 75%
Recourse: Non-recourse except industry-standard "bad act" carve-outs.
Prepayment: Minimum Interest period
Loan Exit: Permanent or takeout financing
Advantages of Commercial Bridge Loans
In addition to their maturities, commercial bridge loans offer several advantages compared to other loan options:
- Commercial bridge loans usually don't take as long to underwrite, which makes it possible to close escrow faster. Being able to close faster might make this loan option attractive compared to other offers.
- Since commercial bridge loans are underwritten primarily on the basis of a property's value and business plan, the credit requirements for these loans are much less stringent than the requirements for traditional long-term mortgages. Sponsors who have bad or poor credit may still be able to obtain this type of loan.
- Interest-only commercial bridge loans allow developers to make interest-only payments while stabilizing a property, and defer the remainder of the loan balance until a property is sold or refinanced.
Disadvantages of Commercial Bridge Loans
While a commercial bridge loan's advantages are helpful in many situations, there are a couple of disadvantages that borrowers should be aware of:
- Commercial bridge loans aren't available for long terms, such as beyond three years. A more traditional loan is needed to obtain a longer term to maturity.
- Interest rates for commercial bridge loans tend to be higher than those of long-term, traditional loans. Paying higher interest can add up over time, although the total interest over a short-term time frame may be minimal.
- Origination, exit, and extension fees for these loans may be higher than fees for other loans.
Get a Free Commercial Loan Quote
Fill out the form below for expert assistance from our team of commercial mortgage consultants.