Commercial Bridge Loan: Purchase Commercial Property without Permanent Financing
Posted: Oct 26, 2017
Popular commercial properties for the investors in the USA include building complexes, hotels, leisure facilities, industrial units, retail & licensed premises and other commercial buildings. Purchasing these properties is not easy as it requires huge investment of money.
In order to finance the purchase of a new property, some people sell off their existing property. Selling any property in the US requires a lot of paperwork and is a time-consuming process. You might have lost out on the commercial property that you were planning to purchase by the time you finish the sale of your existing property.
Such incidents are common among the real estate investors in the US. A short-term bridge loan is one of the best time-tested solutions that are preferred by most of the real estate investors in such cases.
Commercial bridge loans
These loans are also known as commercial mortgage bridge loans and are short-term loans that are used for the purchase of commercial property when permanent financing is not an option. This means that bridge loans fill the financial gap that real estate investors might face while purchasing a real estate property of thei choice in the US. Bridge loans are approved and granted really fast.
In addition, bridge loans can be used by the real estate investors when a property needs significant renovation before it can qualify for permanent financing. Borrowers can also consider a bridge loan when the property has unsatisfactory occupancy rate. It can be used when the borrower’s credit profile needs improvement.
The amount of loan offered by the commercial mortgage lenders can be evaluated based on the value of the real estate property and not its purchase price. Loan to value ratio (LTV) plays an important role in the evaluation of the loan amount. Up to 75% of LTV can be borrowed from any reputed and well-known commercial bridge loan lender in the USA. An amount in the range of $1-25 million can be borrowed from the real estate lenders as bridge loan based on the value of the collateral property.
Bridge loan lenders have easy and multiple payment options for the borrowers to repay the bridge loans within the given time frame. Investors only have to pay the interest during the repayment tenure. The loan amount can be paid after the completion of the term. So the real estate investors have time to sell off their current commercial property and make the full payment afterward.
The bottom line
A bridge loan can be bit expensive as compared to traditional loans. As these loans require minimum paperwork, so the approval of bridge loans is fast as compared to traditional loans. But it will help you to purchase the commercial properties when permanent financing is not an option.
Bridge financing in the US typically has repayment terms in the range of 6 months to 2 years. As compared to traditional finance offered by banks, the rate of interest for a bridge loan is little high. You need to meet the conditions imposed by the commercial lenders to get a bridge loan in the United States of America.
For more information regarding bridge loan financing and bridge loan lenders visit our website parkwestcapital.com