Brief Overview of Bridge Loans and Mortgage Lenders

Mortgage finance or loan sometimes becomes necessary for “bridging” a funding gap to close the purchase of a residential multifamily building. If the investor is closing on a residential building in four weeks and the bank can’t close the purchase finance for three months, or an investor might be selling a building for the purpose of raising cash that is needed right away. In such cases, one may need a 90-day multifamily bridge loan for closing the residential investment property within the promised time frame.

In the United States of America, one of the most practical approaches to procure a mortgage finance to buy a commercial property is to approach commercial mortgage lenders, instead of mortgage brokers.

Based on your mortgage needs, you should determine which mortgage lender is best to meet your financial needs in the most efficient manner. As a borrower, you must understand that there are no two mortgage deals that are alike.

Things to consider before applying for bridge finance

Bridge loans need to be arranged and closed quickly to meet the needs of the borrower. These loans are provided in varied specifications by some of the well-established lenders. Bridge financing solutions are highly appreciated and demanded by the property developers, investors and real estate property owners. Depending on the perceived risk in the loan, interest rates on the bridge capital can be around 7-10%.

Banks and other financial lenders tend to be highly regulated and bureaucratic. So, they are not very effective in the bridge lending space. Bridge lending in the US is usually accomplished by unregulated, private financial firms such as private lenders, mortgage pools, private equity groups, and hedge funds.

The cost associated with buying properties for commercial uses will vary with each real estate firm. The cost is calculated based on a number of factors that include the location of the building and its overall quality. Well-known and renowned lenders will be able to provide a valuation of the commercial property in question.

A number of financial programs are offered via a mortgage for different types of commercial buildings up for purchase. Such financial programs are often offered to purchase the single tenant and corporate offices that are located above the retail shops. Bridge loans are generally structured as simple interest only finance with the principal due in full at maturity.

The repayment term for multi-family hard money is typically between 9-18 months and rarely more than 3 years. Such finances/loans are underwritten based on the equity that exists in the collateral property and is not credit or balance sheet driven.

The final thought

Important thing to consider while taking bridge finance is to go for a reliable lender. In some cases, the people who require the bridge capital do not have the time to shop around and research from the best multifamily money. The best strategy would be to develop relationships with lenders and professional brokers, so you will have them available to you when needed.