Money Lender Loans is a financial firm that offers different types of private money loans, including bridge loans. This firm operates in Orange County, California. At Money Lender Loans, we are focused on solving financial difficulties to different property owners who wish to purchase new properties or upgrade the old ones. We are competent and offer loans at favorable terms.
We have a team of experts who can help our clients through the process of application and ensuring that you get the most appropriate type of loan. We also provide bridge loans to both homeowners as well as commercial real estate investors. We focus on making the process faster and convenient for all our borrowers.
What are Bridge Loans?
A bridge loan is a form of hard money loan that is offered for a short-term basis to provide a property owner with finances during a transitionary period. The property owners usually seek this kind of a loan to enable them to purchase a real estate property before they sell their current property. The loans work well for real estate transactions that require to be funded within a short time. With a bridge loan, a property owner can use the existing equity to borrow finances for purchasing a new property. Once they acquire a new property, they can sell the previous property and pay off the loan. Similarly, bridge loans can be used in the vice versa, where a property owner can obtain the loan against the property being bought and then settle the loan after selling the previous property. Property owners can take this loan when they are seeking to upgrade to a better or a bigger home, and have not yet sold the old one. This loan helps to bridge the time between the selling of the old property and the purchasing of the new property.
How do Bridge Loans Work?
The structure of the bridge loans can enable a property owner to:
- Fully pay off the active liens on their current properties. The bridge loan, in this case, settles all the active liens while the excess is used as a new house’s down payment, or
- Pay it as a second loan in addition to the active liens. The bridge loan is treated as a second mortgage or a third mortgage, which is exclusively used as a down payment for the newly purchased property.
In the first option, it is likely that one will not make monthly payments on the loan. Instead,you will pay mortgage payments on the newly purchased property. Upon the sale of the old property, the proceeds are used to settle the bridge loan in addition to the remaining balance as well as the associated interest.
For the second option, one will still continue making the payments on their old mortgages as well as the new mortgage on the new property.
Just as it is the case with hard money loans, the criteria for lending these loans are based on the value of the real estate property rather than the credit history of the applicant. This means that the lenders do not require too much documentation but emphasize on the appraisal standards.
Bridge loans can enable a property to owner finance up to eighty percent (80%) the value of the combined homes. For instance, if someone plans to buy a new house at $500,000 after selling the old one at $400,000, one can borrow a maximum of $600,000. The remaining $100,000, in this case, can be used as savings for a down payment, in home equity or both. Therefore, you can repay the bridge loan after the sale of the old property and apply for another mortgage for new home financing.
What are the Types of Bridge Loans?
Whether you are a real estate investor seeking to purchase new investments or planning to move to a new home, there are various bridge loans to serve various purposes. Money Lender Loans can provide people with such loans as investment property bridge loans, commercial bridge loans, home purchase bridge loans, and residential real estate bridge loans. The real estate bridge loans are also referred to as gap financing, interim financing, swing loan, bridge mortgage, bridge loan mortgage or caveat loans.
Commercial Bridge Loans
Commercial bridge loans are loans offered on a short-term basis to commercial real estate owners. Real estate property owners can borrow the loan against their current property for purchasing a new real estate property or for funding a down payment. The property owners seek this loan when they do not have enough liquid funds but have sufficient equity they can borrow against. They can then sell the original property after acquiring a new property. The money raised through selling the original property is used to pay off the loan. Compared to residential bridge loans, commercial bridge loans have a lower LTV (loan to value) ratio. Due to the complexities of this loan, lenders may require more documentation and information from applicants.
Bridge Loans for Retirees and Seniors
The retirees and seniors who currently cannot qualify to get an owner-occupied home loan for lack of sufficient funds can also use bridge loans as an option. Seniors can use the equity in their home to borrow a loan and purchase a new property or home. This way, they are not required to provide proof of their income and get approval on debt to income ratio basis. They later can settle the bridge loan after selling their previous property.
Bridge Loans for Investment Property
At times, investors or property owners are interested in repositioning the investment property in order to meet their goals. When it comes to the repositioning of an investment property, funds and speed are two very crucial things. An investor may consider taking a bridge loan for an investment property to achieve this. This loan helps the investors to rehabilitate, renovate, and stabilize the property. The bridge loan can also be used to solve the problems facing your current property prior to its sale.
Loan Terms and Interest Rates for Bridge Loans
The terms, conditions, and costs for bridge loans vary widely from one lender to another. While some are structured to pile up the new and the old debt together, others have a structure that ensures that one completely pays off the first mortgage of the home at the closing of the bridge loan. Some lenders also treat the interest rates for the loans differently. Other factors that may result in variations in these loans include the value of the property, loan term duration, and the credit score of the borrower in some cases. However, a number of the general features for these loans are similar for some lenders.
The interest rates for bridge loans generally range between 8% and 12%. The varying interest rates show the extent of risk as perceived by the lender.
The loan term for most bridge loans is usually 6 months. In some cases, the loan term can go up to twelve months. These loans also take a very short time for approval and funding. A commercial bridge can be funded within as little as 3 weeks. On the other hand, a residential bridge loan can be funded in as little as five days.
Loan to Value Ratios
For the bridge loans, the loan to value (LTV) ratios varies among lenders. The ratios also vary between residential and commercial bridge loans. For instance, most lenders will give loans up to 65% to 75% of the value of the property. On the other hand, the LTV ratio for commercial bridge loans goes up to 60% to 65%. The complexities in the commercial bridge loans cause them to have a lower LTV ratio. For instance, commercial property is considered more difficult to sell and to value. On the other hand, valuing and selling of residential properties is much easier due to the availability of many comparable sales.
Loan Amounts for Bridge Loans
The amounts of loans offered by the lender for the bridge loans also vary from one lender to another as well as other conditions surrounding the loan. The loan amounts, however, range from $20,000 to $50,000,000 and above.
Bridge Loan Fees
There are various fees associated with bridge loans. These fees differ from one lender to another. Some of these fees include:
- Appraisal fee
- Escrow fee
- Some lenders may charge a prepayment penalty
- Origination fee
- Title fee
Basic Requirements for Acquiring Bridge Loans
Whenever you are seeking to secure a bridge loan, there are three basic requirements that the lenders are interested in. Though the requirements may differ from one lender to another, they all revolve around these three requirements. These are security, debt servicing, and repayment requirements.
- Financing Security Requirements
The security provided by the borrower is of great concern to the lender. The lender considers the market value for the real estate property used as security for the loan as well as the amount of equity existing in the case of the advancement of the requested financing. For residential bridge loans, the LTV ratio may rise up to 90% for a property within a strong resale market, and that can be resold quickly. For commercial bridge loans, the LTV ratio may range between 50% and 70% due to the lower predictability of its resale marketability. The LTV rises with the rise in the predictability of the property resale.
- Debt Servicing Requirements
Debt servicing requirements are important for the lender in order to either only cover the interest cost or payment based on principal and interest. One can provide the debt servicing from the current cash flows that can be accepted by the lender or withhold funds from the loan advance in order to cover the debt servicing during the entire term of the loan or part of the term.
- Repayment Requirements For Bridge Loans
The exit strategy for repaying a bridge loan during or at the end of the loan term is another key ingredient to financing a bridge loan request. The borrowers, therefore, need to have clear and certain exit strategies secure bridge loans faster. This is because lenders will consider a confident and strong exit strategy the borrowers will offer.
After substantiating the above three requirements for the lender, the financing of a bridge loan will take place with much ease. The borrower with correct documents to support the requirements is likely to get their loan request approved and funded within a very short period.
What Types of Properties Can You Use Bridge Loans on?
When applying for a bridge loan, the lender may consider a number of different properties on which you can borrow a loan. These properties include offices, industrials, parking lots, hotels, retail centers, multi-family properties, condo inventory, vacation homes, and rentals, among others.
Why are Bridge Loans Advantageous?
Other than being an excellent choice for homeowners with insufficient funds to purchase a house but have equity in their current home or property, and those who wish to relocate to new homes, there are many other reasons why bridge loans. Some of the advantages associated with these loans include:
- The loans help homeowners to avoid the inconvenience of moving twice. This is because they can use the equity in their existing current property to secure a loan to purchase a new home. While still in the old home, they can afford to buy a new one. Without this kind of a loan, a homeowner would be forced to sell their old home, move to a temporal rental house as they wait to relocate to the new home they wish to buy. This would cost them more and be more inconvenient.
- The applicants can get fast approvals as well as funding for this loan. Fast approvals and funding can enable the homeowner to move to the new home within a short time. This is as opposed to loans offered by the traditional loan lenders such as banks.
- With the bridge loans, the applicants do not need to provide income verification in order to get loan approval. The lender’s concern is in the market value of the property provided as security. The lender can, therefore, overlook other issues such as loan modifications, forecloses, short sales, bankruptcy as well as the credit history of the borrower.
- Most sellers would prefer an all-cash offer when selling the homes. This is especially in the case of a competitive market. with a bridge loan, you are able to provide a substantial down payment or an all-cash offer to a seller
- Bridge loans can also be a good alternative to those who cannot secure a loan from the banks due to poor or low credit score.
Repayment of the Bridge Loans
The repayment of the bridge loan may be amortized or unamortized. The amortized loans involve fixed periodical payments. In the unamortized loan, one may pay a one-time repayment along with the loan term or at the end of the term. One may also make monthly interest-only payments with a bullet/balloon payment along with the loan term or at the end of the loan term.
What are the Differences between Traditional Loans and Bridge Loans?
The traditional loans offered by the banks differ in some ways with the bridge loans. For instance, it is easier for borrowers seeking to secure quick financing with a bridge loan than it is with bank loans. The banks involve lengthy application processes, lengthy approval, and funding time.
Other than the borrower’s equity and the value of the property, the banks also focus on the credit score of the borrower. Borrowers who have not yet established a credit history or those with questionable credit history may not be approved for the loan. With a bridge loan, the lender is not concerned with the credit history of the borrower but rather the value of the property. Also, while some traditional lenders may consider the borrower’s debt to income ratio, many bridge loan lenders do not consider such guidelines.
Find a Bridge Loan Lender Near Me
Bridge loans play a very important role in bridging the gap between the circumstances of the current property and a future property for both residential homeowners and commercial real estate investors. People who repeatedly buy and flip homes can benefit greatly from this kind of loan. It is therefore important for the borrower to know about these loans and have accessibility to them. This will push you from your current position to a better position. At Money Lender Loans, we are focused on solving your financial difficulties when it comes to purchasing a new home. Our experts are also able to evaluate your financial situation in order to advise you on the best loan options for your needs. If you are seeking a bridge loan in Orange County, call us at 949-409-4372.