In the ever-changing, cutthroat world of real estate entrepreneurship, investors need to act quickly when the right opportunity presents itself. As a mortgage broker, your clients rely on you to navigate the ins and outs of financing, ensuring their next big move isn’t impeded by outdated systems and legacy technology.
During those times when a borrower is not in a position to qualify for a loan through a traditional lender, or when the sale of one property is holding back the purchase of another, an alternative option may be needed. Under such circumstances, a bridge loan is not only the perfect solution, it’s one that will leave you feeling like a bit of hero, helping to save your client’s goal from the gutter.
Who Needs a Bridge Loan?
A bridge loan—also called a swing loan, gap financing, or interim financing—is that non-standard, short-term loan that allows your borrower to “bridge” the gap between the sale of their current project and the purchase of their next one. Typically lasting from 6-12 months, a bridge loan provides, or extends, finances until more traditional, permanent funds are secured. Recommend a bridge loan to your clients when:
Time = Lost opportunity.
Your client has just signed a contract and has a bank loan all lined up—problem is, the seller wants them to close soon or else they’ll lose the property to the next guy on the list. Banks are known for a lot of things but speed isn’t one of them and now your borrower’s pulling his hair out, worried that the deal of a lifetime is about to slip right off the hook. Here’s where you come in, with a timely solution that buys your borrower all the time he needs, while giving the bank time to complete its process, with no extra hassle or pressure.
Multiple Purchases.
Have a borrower who needs their money to go further? With an aggressive investor, sometimes multiple properties can come together at the same time. You can help your borrower bridge the gap (pun intended) allowing them to purchase both properties at the same time using a bridge loan for each purchase.
Pro-Cash Flow.
Got a client who’s property rich but cash poor? Show them how a bridge loan can give them greater flexibility, allowing them to meet their current expenses, while quickly closing the deal on new properties, or even freeing up short-term capital to pay off their existing mortgage.
The Benefits of Bridge Loans.
• No waiting
The saying, “time is money,” is never truer than when it comes to real estate. Waiting for one project to wrap up entirely before being able to begin a new one is not only lost income and potential opportunity, it’s also just plain boring for fast-moving investors who thrive on the thrill of the next big project.
• No missed opportunities
No professional baseball player wants to watch the game from the dugout. Likewise, real estate entrepreneurs who are passionate about their projects don’t want to sit one out, watching their competition snatch up timely investments from right under their noses. Bridge loans allow borrowers to stay in the game.
• Over and done
For borrowers, the short-term nature of bridge loans means brevity and ease. The process for obtaining one is faster and less of a hassle than for a long-term loan, and bridge loans are designed for a relatively quick payoff as well. Short and sweet, bridge loans are a mortgage brokers best ally when clients find themselves in a pinch.
• Credit boost
Clients can payoff their bridge loan ahead of the game, before permanent financing is in place, which means they may be rewarded with a significant boost in their credit score. Every building block counts for a real estate entrepreneur seeking to finance increasingly ambitious projects. In their eyes, gaining access to more sizeable long-term loans than they could previously qualify for is paramount—a bridge loan can be another stone along that path.