Do I need a Bridge Loan?

Chances are, if you’ve stumbled on this post; you’re contemplating your first Bridge Loan.
Financial decisions are always a bit overwhelming, especially if it’s new territory. Legal
speak, rules and regulations, and fine print can quickly lead to stressed out situations if
you’re not careful. In hopes of cutting some of your research time down, I wanted to offer
up my findings, and what ultimately lead me to my first (and following) successful Bridge
Loans.

Bridge Loans, so we’re on the same page, are sometimes referred to as Swing loans, or
even Caveat Loans. Typically spanning a few weeks to a year or so, and often used in
purchasing homes; Bridge Loans help you ‘Bridge’ the gap between selling your previous
home, and purchasing your new home. Bridge Loans are also great for individuals renting
buildings (homes, office space, or otherwise), allowing you to renovate key pieces that will
immediately convert into higher rental prices, or even allowing you to purchase at discount
in bulk, and a short time later, selling for additional profits.

Bridge Loans are great in their unique setup. Having a quicker lifespan than a standard
loan means the lender doesn’t anticipate collecting as much profit from you, and that
results in elevated interest fees. On the other hand, you’re usually entering into a Bridge
Loan with knowledge that you’ll soon have the ability to pay it back quickly, resulting in
less time to accrue those interest fees anyway. As with anything in life, there are Pros and
Cons with all decisions – each decision specific to the person or situation. The original
Pros and Cons list I gathered for my first loan is below:

Pros:
● Breathing room! With a Bridge loan, you have some wiggle room to get you
through your next move
● Quickly get you into a new home without having to sell your previous
● Gives you a cushion for closing fees (selling a home)
● Allocates additional cash in unexpected times (IE: a higher than anticipated
construction cost; or a snag in renovating)
● Bridge Loans are Non-recourse loans. The lender will only be able to recoup
repayment through the value of the property (even if the value of the property has
depreciated)

Cons:
● Being ‘High Risk’ for the lender, it’s a bit harder to get accepted for a Bridge Loan
over other available loan types.
● Piggy-backing off the above con, if you’re using a BL to purchase an additional
home, you’ll have to first qualify to own more than one home.
● As with any loans, bridge loans are subject to interest fees

● To qualify, you have to already have a good line of credit
Final thoughts? The benefits vs risks depend directly on you and your situation. Bridge
loans may not be the go-to for everything, but if you find yourself in crunch time between
transitioning to a new home, getting additional renters into your property, or even
purchasing bulk for a quick turn around on profit, a bridge loan could be the shining star
you need.

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