When mortgage rates hit historic lows during the Covid-19 pandemic and homeowners were selling and purchasing homes in droves, many needed something to “bridge the gap” between their move-in and move-out periods.
For this in-between period, many lenders offered their borrowers a bridge loan.
Bridge loans have always been a popular option for real estate investors who were between selling and purchasing properties, or for struggling businesses that needed a financial boost.
Now, they have grown even more in popularity among homeowners who needed to buy some time between a quick sale or purchase.
Let’s dig into how bridge loans work, what important role they have played during the pandemic, and how you can take advantage of this popular loan type through a reputable hard money lender.
How do bridge loans work?
If every real estate deal could be perfectly timed, borrowers would simply sell their current property and use those funds to purchase the next property.
However, in many instances this isn’t the case.
During the Covid-19 pandemic, it has been a seller’s market in most of the U.S. Buying competition has been fierce, and if you didn’t make the right offer on a home quickly enough, you could easily lose your chance.
Alternatively, some sellers were putting their home on the market prior to purchasing a home, and receiving the right offer within hours.
These scenarios leave a lot of gaps between finding and selling a home.
A bridge loan offers the perfect solution: Quick, short-term funds that allow a borrower access to cash while they wait for longer-term financing, or fast funds to purchase a new home while you wait for the current one to sell.
Who should use a bridge loan?
Bridge loans serve a variety of purposes for a wide range of borrowers, including homeowners, businesses, and investors.
Some common bridge loan scenarios include:
- Homeowners who want to build or purchase a new home while they wait for their current one to sell
- Homeowners who need to live in their current home while their new home is being built or purchased
- Homeowners who need to quickly move to a new city or state for a job before they can sell their current home
- Homeowners who want to avoid paying private mortgage insurance (PMI) by paying a 20% down payment
- Homeowners who want to avoid contingencies in their purchase offer to increase their chances of winning the bid
- Business owners who need to purchase a new building or cover rent or utility costs while they wait for longer-term financing
- Real estate investors who fix-and-flip homes and want to purchase another property quickly before the current one sells
Borrowers often use bridge loans as a second mortgage so they can put a down payment on a home, or they will use it to pay off their current mortgage and use the remaining funds as a down payment.
The bottom line is, if you’re considering a bridge loan, you need funds quickly to make a deal happen.
While these scenarios have always been popular reasons for borrowers to seek out a bridge loan, during the Covid-19 pandemic the need became more frequent and more urgent.
What’s your loan scenario?
Why have bridge loans become popular during the Covid-19 pandemic?
The housing market conditions that blossomed as a result of the pandemic created unique circumstances for a variety of borrowers.
There was a combination of people losing or quitting jobs in large numbers and mortgage rates plummeting, plus a change in people’s perspectives, goals, and overall outlook on life.
As a result, people were selling and purchasing homes at rapid speed. They wanted more space for home offices and gyms, and they wanted better opportunities somewhere else.
For business owners and investors, this also meant rapid changes — including both financial struggles and opportunities for growth. A bridge loan can provide struggling businesses with short-term funds to cover immediate, piling expenses.
All of these unique borrowers have needed to find the right financial support to make these changes.
What are the benefits of a bridge loan?
Due to the uncertainty and urgency of those needing to make moves during the pandemic, bridge loans provide some needed relief.
This short-term funding solution gives borrowers fast access to achieving their goals.
For those in particularly time-sensitive scenarios, such as those leaving the state for new opportunities, bridge loans can be the difference between losing or securing that opportunity.
The main drawback of bridge loans is finding a lender who will provide one.
While more traditional lenders such as banks began offering bridge loans to a wider range of borrowers during the pandemic due to need, it can be difficult for many borrowers to qualify with a bank.
How to get a bridge loan from a private money lender
Traditional lenders have the ability to offer bridge loans to borrowers, but they must follow strict guidelines and requirements to protect themselves since these loans can be considered risky.
These requirements, including income, credit, and debt-to-income ratios (DTI), can make it difficult for borrowers to get a bridge loan. Additionally, there usually are conditions such as paying off your first mortgage at closing, or making up-front payments.
In many cases, these requirements and conditions just aren’t feasible for a borrower — and especially not during a pandemic.
How hard money lenders make deals
A reputable private money lender, on the other hand, makes deals based on common sense and the overall merits of the deal. Marquee can use one or more properties as collateral to help borrowers achieve the leverage they need for their bridge loan needs.
They want to hear about your unique scenario and goals, and will use their years of experience to make quick decisions.
Private money, or hard money, lenders such as Marquee Funding Group offer the following benefits:
- Same-day approvals
- Closing in as fast as seven days
- No income documentation required for bridge loans
- In-house underwriting, servicing, and processing
- Loan amounts from $50,000 to $20 million
Marquee is the ethical standard for hard money lenders. We want to build real relationships with our borrowers, for years of deals to come.
Submit your bridge loan scenario to Marquee Funding Group
Marquee Funding Group is able to structure unique mortgage options for even the most complicated lending scenarios. In fact, this is our specialty.
If you need a bridge loan and have feared you wouldn’t be able to qualify, reach out to our team. We’d love to take a look at your unique scenario and tell you how we can help.
In addition to bridge loans, Marquee also offers:
- Loan-to-value up to 70% (deal specific)
- Loan amounts from $50,000 to $20 million
- Owner-occupied and non-owner-occupied loans for both consumer and business purposes
- Construction, ground up, fix and flip, or fix and occupy loans
- Commercial and industrial loans
- Short-term and long-term loan options
- Purchase money, rate-and-term refinance, and cash-out refinance
Submit your loan scenario today to get started with a bridge loan.
We look forward to helping you meet your goals and grab new opportunities.