Los Angeles Bridge Loans

A bridge loans are interim financing for an individual or business until permanent or the next stage of financing can be obtained. Money from the new financing is generally used to pay back the bridge loan, as well as other financial needs.

Bridge loans in Los Angeles are typically more expensive than traditional bank financing because of a higher interest rate, points and other costs that are amortized over a shorter period. On the other hand we are typically arrange hard money loans quickly witha very little documentation.

Bridge loans are often used in Los Angeles for commercial real estate purchases to quickly close on a property, retrieve real estate from foreclosure, or take advantage of a short-term opportunity in order to secure long term financing. Bridge loans on a property are typically paid back when the property is sold, refinanced with a traditional lenders. The timing issue may arise from project phases with different cash needs and risk profiles as much as ability to secure funding.

A bridge loans are similar to the hard money loans. Both are non-standard loans obtained due to short-term, or unusual, circumstances. Bridge loan interest rates are usually 12-15%, with typical terms of up to 3 years. 2-5 points may be charged. Loan-to-value ratios generally do not exceed 60% for commercial properties, or 65% for residential properties, based on appraised value.
A bridge loan may be closed within a week.

Most banks do not offer real estate bridge or hard money loans because the speculative nature, risk, lack of full documentation, and other factors, do not fit the bank's lending criteria.

1. A bridge loan is often obtained by developers to carry a project while waiting for the permit approval i. Because there is no guarantee the project will happen, the loan might be at a high interest rate and from a specialized lending source that will accept the risk. Once the project is fully entitled, it becomes eligible for loans from the bank that are at lower-interest, for a longer term, and in a greater amount.
2. A consumer is purchasing a new residence or REO property and plans to make a down payment with the proceeds from the sale of a currently owned home. The currently owned home will not close until after the close of the new residence. A bridge loans allows buyers in Los Angeles to take equity out of the current home and use it as down payment on the new residence, with the expectation that the current home will close within a short time frame and the bridge loan will be repaid.
3. A bridging loan can be used by a business to ensure continued operation during a time when for example one senior partner wishes to leave but another wishes to continue the business.
4. A property may be offered at a discount if the purchaser can complete quickly with the discount off setting the costs of the short term bridging loan used to complete. In auction property purchases where the purchaser has only 14-28 days to complete long term lending and traditional mortgage may not be aviable in that time frame when the bridge loans would be.