A multifamily bridge loan is a financial tool used by commercial property owners to bridge the gap between the instant they get the loan and the ability to immediately work on the property, which can be rehabilitation or stabilization prior to getting conventional long-term multifamily financing.
Ideally, investors who need to close on a multifamily property quickly, be it bankruptcy or foreclosure, can take advantage of bridge loans as they close fast, and are based more on the value of the property and not the income the property generates down the road. Even though each borrower encounters different circumstances, bridge loan requirements remain pretty consistent at about 65% of the property value, and a payoff date usually between 1 to 3 years, with the average about 12-24 months.
There are several components for investors to consider when searching for bridge loans, including:
- Short-term financing and flexibility: The largest benefit is speed. Some bridge lenders can expedite loans in under 30 days compared to typical loans that can take more than 90 days to fund. Once certain financial parameters are met, such as improvements to the property, the investor can quickly adjust to a permanent mortgage.
- Long-established banking relationships: Private bridge lenders rely on long-standing banking relationships, and in Fidelity Bancorp Funding’s case have access to private investment capital. A recent trend in loan underwriting is reflected in the way banks have become more risk averse and changed their practices for new loan requests. Many institutions prefer working only with existing borrowers or focus on property types perceived as low risk, such as medical facilities, warehouses, and distribution centers.
- Interest rate: Mortgage rates for bridge loans are generally higher as bridge lenders take on larger risk, such as liquidity, default and informational risks.
- Amortization: Most bridge loans are interest-only, with little or no principal amortization. The full principal amount is usually due at maturity, and negative amortization and zero-coupon notes can be an option in some cases.
- Collateral: Bridge lenders focus generally on underlying collateral, rather than creditworthiness.
What to Look for in a Bridge Loan Lender
#1 Reliability & Reputation
Finding a lending partner who is an established veteran in the business with a proven track record will be key for any investor. A reliable and reputable lender will eliminate headaches and risks for both parties by fast-tracking the loan, including creating documents and closing the loans in a short timeframe.
#2 Speed & Flexibility
Most conventional lenders such as banks or government agencies have rigorous underwriting procedures in place to monitor a loan, and therefore take about 60+ days to close a loan. The right bridge loan partner will help you close your deal in a matter of days or weeks.
#3 Expertise & Competitive Rates
In addition, an established bridge lender can support investors by adjusting to market forces, latest competitive interest rates, and correcting all issues quickly and with confidence. A flexible lender will make the credit box fit YOU and not the other way around.
Find Your Match:
As a 20-year veteran in the multifamily bridge loan business, Fidelity Bancorp Funding provides tremendous value-add to its investors, from understanding the microeconomic trends in the SoCal marketplace to long-standing banking and private investor relationships. This familiarity with the community and the ability to offer investors quick access to short-term bridge financing is critical, however, the long-standing relationships with banks has allowed the company to also provide long-term and permanent loans – a feature not offered by any other lender in the nation.
At Fidelity Bancorp Funding our rates start at 6.99%, we loan up to 75% of the value of the property, with loan amounts up to $10,000,000. Our origination fees range between 1-2 points depending on loan size and term, and our processing fees are $1,495 with loan terms of up to 36 months. Our loan officers can fund loans in under 5 days.