A bridge loan is a short-term real estate loan that gives the property owner time to complete some task - such as entitlement, improving the property, or selling the property.
Terms are usually six months to one year, although many commercial bridge loan lenders often grant extension option of six months to one year with a usual cost of 1/2 to 2 points.
Bridge loans are more expensive than permanent loans and where a commercial property might run 6% permanent loan. A bridge loan is usually LIBOR plus 3% to 4% (8.25% to 9.25%), an 2 points.
Bridge loans are typically replaced with permanent financing after improvements are completed. As bridge loans are short in nature, most bridge loans have no prepayment penalty
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