Borrowing money might not always be desirable, but it can be necessary if not unavoidable. Paying cash isn’t always a possibility. The cost of goods or services may be so high that financing makes sense. Depleting personal funds isn’t always the wisest thing to do. And funds can only be depleted if they exist in the first place. Someone with little or no money may be required to borrow in order to cover costs. Thankfully, the world isn’t going to ever be short of lending sources.
Not every lender, however, approves all the applications that land on a desk. Not every borrower wishes to deal with the terms put forth by a particular lender. Borrowers do maintain the option of taking their business elsewhere. For those borrowers interested in funding for real estate endeavors, bridge loan lenders could be a valuable and viable option.
What are Bridge Loan Lenders?
Bridge loan lenders can be deemed as investors who direct money in the form of loans for real estate transactions. Those not interested in working with a traditional financial institution may discover bridge loan lenders to be a preferable alternative. Contrary to popular belief, seeking funds from a conventional bank isn’t always easy or desirable. Again, access to alternative lending sources allows those interested in funding real estate endeavors to go outside the traditional sources. Projects do not need to stall as a result.
A bank, credit union, or other lending institution might look at a number of different criteria before making a determination to approve a loan. Obviously, the lender looks out for its own best interests and wishes to avoid risk. A bridge loan lender, however, may be willing to take on more risk since such a lender sees issuing a loan as a form of short-term/high-return investment.
An Option for Real Estate Entrepreneurs
Persons in the market for a home aren’t always looking to live in the residence they purchase. Acquiring a “fixer upper” with the intention of repairing and selling the property serves as a classic means an entrepreneur can amass great wealth. If the buyer maintains the capability of performing significant repairs within a reasonable budget, he/she can resell the house at a great profit. The value of the home invariably increases upon completing the renovations.
A traditional mortgage lender, however, may not be too thrilled about approving a loan for someone wishing to flip a home in 90 days. Generally, the dilapidated condition of the home proves to be more than off-putting to a conventional lender.
Traditional mortgage lenders also don’t move as swiftly as real estate entrepreneurs wish. Receiving approval for a mortgage may take several weeks. Procuring approval in a day or two likely would be totally out of the question. Entrepreneurs could lose out on a good deal due to the delays inherent with standard mortgage approval. Going outside the traditional system keeps investment doors open for those relying on making a move with no delays. Bridge loan lenders might be the ones holding open those doors.
Drawbacks with Bridge Loan Lenders
Nothing in life is perfect. Bridge lending isn’t excluded from this fact. The two drawbacks associated with this type of lending would be the interest rates and the term of the loan. Interest rates come in at high levels: 10% to 12% isn’t uncommon. Also, the loans require repayment within six months to one year. Bridge loan lenders aren’t in the business of approving 15-year mortgages. The lenders act as investors. They engage in a mutually beneficial agreement with a potentially high-risk borrower. Therefore, interest rates and terms won’t be at the low levels a mortgage lender presents.
Explore the Option
Real estate investors should seriously look at options made available by bridge loan lenders. The deals offered by such lenders could make a previously difficult real estate transaction accessible.