A bridge loan is a short-term financing option designed to help borrowers “bridge the gap” by providing immediate funds during a transitional period.
Since traditional financing takes time, bridge loans provide a solution by offering quick access to funds. This can be very beneficial in competitive scenarios where timing is crucial.
Bridge Loan in Real Estate
Often used by real estate investors, investors, and businesses, bridge loans can be used in the following situations:
1. Relocation
If you’re looking to relocate but haven’t sold your existing property yet, taking out a bridge loan can significantly reduce the stress of the transition.
This short-term financing option provides immediate access to funds that can cover the down payment or even the full purchase price of your new property.
This flexibility allows you to settle into your new space at your convenience.
By securing a bridge loan, you can move forward with purchasing the new home without the pressure of needing to sell your current property first.
Once your existing property sells, you can use the proceeds to pay off the bridge loan, ensuring a smooth financial transition between homes.
2. Property Flipping
For real estate investors engaged in property flipping, a bridge loan can provide the necessary capital to finance renovation costs quickly.
This short-term loan enables investors to purchase a property that requires upgrades or repairs, allowing them to enhance its value before selling it for a profit.
3. Waiting for Permanent Financing
If you’re waiting for long-term financing like a mortgage or commercial loan, a bridge loan may be the ideal solution. This type of loan allows you to cover immediate expenses in as little as seven days, so you can keep your plans on track.
With a bridge loan, you gain the flexibility to move forward without delay. Once your permanent financing is secured, you can easily repay the bridge loan, ensuring a smooth transition in your investment journey.
How Does a Bridge Loan Work?
The application process for a bridge loan will depend on a variety of factors. For starters, here’s what a typical bridge loan application process looks like:
1. Application Process
The bridge loan application process starts with selecting a reliable hard money lender. Make sure to only work with trusted lenders like SDC Capital to ensure an efficient lending process.
Once you’ve chosen a lender, schedule a consultation to receive a free quote. During this initial meeting, your lender will outline the timelines and requirements specific to bridge loans.
Keep in mind that requirements can vary from lender to lender, so it’s helpful to clarify any unique terms or conditions early on.
2. Gather Documentation
Even though bridge loans are often easier to obtain than traditional loans, you’ll still need to provide some key documents. These usually include the details of the property involved, proof of income, and credit report.
3. Property Evaluation
Since bridge loans are typically secured by the borrower’s existing property, the lender may require an appraisal or evaluation of its current value.
This helps the lender determine the loan amount, which is usually based on a percentage of the property’s appraised value or the equity you have in it.
4. Loan Offer
Once your application and documents are reviewed, the lender will offer you a loan proposal.
This proposal will outline:
Loan Amount: The total sum you are eligible to borrow
Interest Rate: The percentage charged on the loan, which will affect your overall repayment
Repayment Structure: Typically structured as interest-only payments during the loan term.
Loan Term: The duration of the loan, usually ranging from 6 to 24 months.
Fees and Closing Costs: Any additional charges associated with the loan, which should be clearly outlined.
Carefully review these terms and don’t hesitate to ask for clarification on any points before moving forward.
5. Signing and Closing
Once you accept the terms, you’ll move into the signing and closing phase. At closing, you’ll sign the loan agreement, and any applicable fees may be paid.
TIP: Ensure a clear plan to repay your bridge loan. Prepare ahead to avoid any unexpected financial strain at the end of the loan term.
Types of Bridge Loans
Bridge loans come in several types, each tailored to meet different financial needs. Here are the most common types of bridge loans available:
1. Residential Bridge Loan
A residential bridge loan helps homeowners or buyers secure funds to purchase a new home before selling their existing property.
These loans are popular in competitive housing markets where buyers need quick access to funds to make a purchase offer.
>> Read here to learn more about residential bridge loans.
2. Commercial Bridge Loan
Commercial bridge loans, on the other hand, are designed for businesses or investors acquiring or renovating commercial real estate.
>> Read here to learn more about commercial bridge loans.
Bridge Loan Interest Rates
Bridge loan interest rates are typically higher by 2-3% than conventional mortgage rates. This reflects the short-term and flexible nature of these loans.
While traditional loans might offer interest rates in the 5-7% range, bridge loan rates can vary from 8-12%, depending on the lender, the borrower’s credit profile, and the amount of collateral offered.
Factors influencing bridge loan rates include:
Loan amount and term: Larger loans or extended terms may come with lower interest rates due to increased borrower stability.
Collateral type: High-value collateral can sometimes help secure better interest rates.
Market conditions: Competitive real estate or economic factors may affect bridge loan rates, either raising or lowering them depending on demand.
Bridge loans often include origination fees, closing costs, and other fees that borrowers should consider, as these can increase the overall cost of borrowing.
Best Bridge Loan Lenders in California
Ready to get started with your real estate investment journey?
California's real estate market moves fast, and securing the right financing can make all the difference. Whether you're a real estate investor or broker, partnering with a reliable bridge lender ensures you can act quickly on opportunities without missing out.
1. SDC Capital
SDC Capital is California’s premier real estate bridge lender, with decades of experience in the industry. Our dedicated team is committed to guiding you through every step of the lending process, ensuring a smooth and efficient experience.
We specialize in providing hard money loans for a variety of purposes, including:
Residential Bridge Loans: Secure quick funding to bridge the gap between selling your current home and purchasing a new one.
Residential Rehab Loans: Finance renovations and improvements on residential properties to maximize their market value.
Commercial Bridge Loans: Get the necessary capital for commercial real estate investments, enabling you to act quickly in a competitive market.
New Property Construction Loans: Fund your new construction projects with our flexible financing solutions tailored to your needs.
To explore our recently funded loans and see how we've helped clients achieve their real estate goals, click here.
For a comprehensive list of the best hard money lenders in California and across the United States, make sure to check these guides:
Best Hard Money Lenders for 2025.
Top Hard Money Lenders
Hard Money Lenders in California