Does a bridge loan require an appraisal?
7 minute read
June 20, 2022


Most mortgage lenders require an appraisal to confirm a property’s value, but this isn’t always the case.

When it comes to bridge loans, it depends on the type of lender you use to fund the deal.

Lenders may or may not require a bridge loan appraisal depending on their specific requirements for the loan and whether it makes sense for a particular deal.

Generally, hard money lenders are more flexible about bridge loan appraisals than traditional financial institutions.

Read on to learn how bridge loans work, when you should consider one, and whether you’ll need an appraisal for your unique bridge loan scenario.

How does a bridge loan work?

Bridge loans are a type of short-term financing used to “bridge the gap” between an immediate need for cash, and a more permanent source of funding.

For homeowners, this might look like a short term loan to cover the gap between selling a home and purchasing a new one.

For business owners and investors, it could be used to purchase or begin renovations on a new property while the investor works to secure a long-term source of funds.

“Short term” for bridge loans usually means anywhere from a few months to a year.

Traditional mortgage lenders who work for banks or other financial institutions must usually follow lending requirements established by Fannie Mae and Freddie Mac, so they will require certain credit score, debt, and equity figures.

These types of lenders will almost always require an appraisal. They will need to confirm the amount of equity the borrower has in the home, since the bridge loan will lend against it.

Private money lenders will take a different approach, based more on the overall merits of the deal rather than strict requirements, but in some cases an appraisal may be beneficial for them as well.

In these cases, however, it’s usually for the benefit of the borrower, too.

What’s your loan scenario?

When to consider a bridge loan

Bridge loans are for borrowers who need immediate funds to secure a great opportunity.

Whether this means the perfect home just came on the market or you need to expand your business, these loans usually come with a sense of urgency to make the deal work.

There are pros and cons of bridge loans, as with any loan type, which is why it’s important to understand the unique scenarios that call for a bridge loan to determine whether it matches your needs.

Let’s take a look at some common bridge loan scenarios for a wide range of borrower types, including consumers, business owners, and investors.

Consumer bridge loan scenarios

  • You want to put a contingency-free offer on a home to appeal to the seller
  • You got a new job in a different city and can’t wait to sell your home before putting a down payment on another
  • You want to make a 20% down payment to avoid paying private mortgage insurance (PMI)
  • Your current home’s closing date is after the closing date for the new home
  • You want to avoid having to move twice while you wait for your home to sell

Commercial bridge loan scenarios

  • You were in the process of securing funds for a new business or investment property, but the perfect opportunity just came on the market
  • You want to put a down payment on your next property, but the property you’re currently selling to pay for it hasn’t sold yet
  • You need to secure immediate funds to begin renovations
  • You need funding for business expenses during periods of transition, such as an acquisition, or for inventory or upgrades

Consumer bridge loans often aren’t offered by traditional lenders because they are higher risk loans. If they are, borrowers usually must get them from their current lender, and will face strict requirements.

A hard money lender can help consumers bridge the gap between a sale and purchase, and they also specialize in the types of quick, flexible lending options that investors need to be successful.

What are the major cons of bridge loans?

When it comes to bridge loans, timing is everything.

The biggest downside to a bridge loan is that if the timing is off because your existing home or property doesn’t sell in time, or another deal you were relying on for permanent financing falls through, you’ll be left with two mortgages, and two mortgage payments.

The other con is the requirements you’ll have to meet if you go through your original lender.

However, you can escape those strict requirements if you connect with an experienced hard money lender for your bridge loan.

Is an appraisal required for a bridge loan?

Now that we’ve tackled how bridge loans work and why a borrower may need one, it’s time to address the big question: Will you need a bridge loan appraisal?

Appraisals will add an additional cost to your closing fees, so it’s understandable why a borrower may want to avoid one.

If you go to a traditional loan officer for a bridge loan, you can count on needing an appraisal. They will want to make sure they’re protected from the risks if you can’t repay the loan.

A hard money lender, on the other hand, may not require one. It all depends on the deal at hand.

Generally, appraisals allow both borrowers and lenders to know for certain a property’s worth. This can help identify the return on investment, the available equity, etc.

But hard money lenders will also take into account a range of other factors to quickly identify whether a deal will work. It may depend on other area properties, how recently they were appraised, and how recently the property itself was appraised.

However, the one thing you can count on with a hard money lender is that if something isn’t necessary, they won’t make you get it. For these types of lenders it’s not about checking off boxes, but about making purposeful moves that benefit both parties.

How to get a bridge loan with a hard money lender

Not all hard money lenders are the same. For your homeownership goals or investments, you’ll need to choose a lender with the right types of experience mixed with a personalized approach.

Marquee Funding Group is the ethical standard in hard money lending. Our team understands the urgency you need to get the deal done, which is why we base our decisions above all else on the merits of the deal and benefits to our customers.

For bridge loans, we can lend up to 70% of the combined value of any two, three, or more properties while keeping existing conventional loans in place. We can take a first, second, or third position on the departing residence while taking a first on the new purchase.

We are able to expertly structure even the most unique, complicated lending scenarios. In fact, this is our specialty.

We offer borrowers:

  • Closing in as little as 7 days
  • Simple application process and underwriting
  • No limit to the number of loans per borrower
  • Flexible lending requirements

Submit your loan scenario to our team today for quick review, or reach out to us for any questions or concerns you have about the process. 

We are happy to talk through your unique scenario with you and let you know quickly if we have a deal.

Photo by Andrea Piacquadio

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