California Bridge Loans

California bridge loans are a source of short-term financing used by real estate investors, homeowners, and businesses to“bridge the gap” between buying a new property and waiting for an existing property to sell.

Once the existing property has been sold, those funds are typically used to repay the bridge lender, closing out the loan.

Bridge loans can be funded in 5 to 7 days, and the duration generally lasts 3 to 12 months.

These types of loans are ideal for securing time-sensitive deals like fix-n-flips, seizing opportunities, renovation projects, and relocating a property or business.

The structuring and function of a bridge loan vary significantly from those of conventional bank loans.

Traditional mortgages are typically constructed with low interest rates and long repayment periods, whereas bridge loans have higher interest rates and shorter repayment periods.

The bridge loan underwriting process requires minimal documentation. It can therefore be funded in less than a week, while a bank’s underwriting process is more rigorous, causing loan approval to take weeks, if not months.

California Bridge Loan Fees

• Origination Fee: 1-3% of loan amount
• Closing Costs: Title & escrow, appraisal or broker price opinion (BPO) & legal fees
• Pre-payment Penalties:  Usually a minimum of 3 or 6 months

The underwriting process for a bridge loan centers around your equity in the collateral property; other factors, such as property location, property type, and your financial strength, are also of importance.

• Interest Rate: Rates of 8% to 12%
• Loan-to-Value (LTV): Strive for an LTV of 65-70% to ensure loan approval 
• Property Location: Major cities and suburbs are ideal candidates for bridge loans; rural areas are less desirable
• Property Type: Residential, commercial, and industrial properties are eligible for better rates than land or ground-up construction projects 
•  Exist Strategy: Having a sound repayment plan, like selling the property or refinancing into a long-term bank loan, will alleviate lenders' concerns, resulting in more favorable terms for you.

Additionally, having good credit, cash in the bank, substantial income, or additional properties will further improve your chances of securing a California bridge loan.

It should be noted that a downturn in the economy or real estate sector can cause lending to tighten up, restricting accessibility to bridge loans, leading to increased rates.

See the complete overview of Bridge Loan Rates and Fees.