A bridge loan is a short-term loan (typically 3 to 36 months) that “bridges the gap” between financing and a future event, such as a sale, refinance, or removal of an existing obligation or contingency. On PeerStreet, bridge loans are only for a business or investment purpose. They are for non-owner occupied properties which can be zoned for residential or commercial use.
Bridge loans typically have a faster application, approval and funding process than traditional loans or term mortgages because they are made by private lenders rather than traditional banks. Bridge loans can provide the capital required for a new acquisition or a refinance from a previous mortgage, typically with the intention of:
- Improving the property, then selling (fix and flip)
- Improving the property, then renting long term (fix to rent)
- Purchasing without major improvement, then renting long term (buy to rent)
Fix and Flip and Fix to Rent are types of bridge loans that enable a buyer to acquire a property and then to renovate it. A notable feature of Fix and Flip & Fix to Rent loans is that they can have a construction reserve component which enables the borrower to use to fund repairs, land or dwelling improvements, and construction.