Bridge Loan
Quick Answer
Short-term financing used to 'bridge' the gap between buying a new property and selling or refinancing an existing one.
Definition
A bridge loan is short-term real estate financing designed to bridge a timing gap — typically between the purchase of a new property and the sale or refinance of an existing one. For investors, bridge loans are often used to acquire a property quickly before permanent financing is arranged, or to hold a completed rehab while arranging a sale or long-term refinance. Terms are typically 6 to 24 months.
Why It Matters for Flippers
Bridge loans can provide interim financing for investment acquisitions, subject to underwriting and closing requirements. Investors may also use a bridge loan for renovation before seeking a long-term DSCR refinance, which requires a separate approval.
Example in a Flip Deal
An investor completes a full renovation and is waiting 60 days for a buyer to close. A bridge loan allows them to pay off the construction lender while they wait, avoiding an expensive default or extension. Alternatively, an investor uses a bridge loan to close on a new acquisition before their previous property sells.
Related Terms
Fix and Flip Loan
A short-term real estate loan designed for investors who buy, renovate, and resell properties for profit.
Hard Money Loan
Asset-based short-term lending secured by real property, typically used by investors who need fast financing without traditional income verification.
Exit Strategy
The plan for how an investor will repay their loan — typically by selling the property or refinancing into long-term debt.
LTV (Loan-to-Value)
The ratio of the loan amount to the appraised value of the property, expressed as a percentage.