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Bridge Loans – the Instrument of the Real Estate Professionals

Published by Michael Rose, 09.02.2021

Professional real estate investors are increasingly using bridge loans in order to act quickly and flexibly when opportunities arise in the market. The main advantage of this instrument is the short time between loan application and loan disbursement, which gives investors a considerable advantage when sourcing properties. Additionally, the investors gain time to look out for the best financing in the market at their convenience. This - and the usually short terms - more than compensates for the higher costs of this instrument.

Bridge loans are loans with a short ma­turity, usually less than 6 months. In con­nection with real estate investments, they are usually mortgage-backed. They are normally repayable at any time without additional costs. Interest rates are typi­cally in the range of 0.5% to 1% per month, supplemented by a one-off arrangement fee. Bridge loans are usually arranged through specialised intermediaries. They have the needed contacts to find the right lender for the real estate investor. In addi­tion, well-positioned intermediaries have the know-how to analyse the project, draw up the necessary loan agreements and handle the transaction in a coordinated manner with all parties involved, such as public authorities, specialised lawyers, etc. Experienced intermediaries have a short lead time. With qualified intermediaries, the turnaround time for suitable transac­tions from the loan application to the dis­bursement is very short, and usually amounts to a few days, even for large loan amounts. 

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