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All About Multifamily Bridge Loans

One of the biggest changes real estate investors have seen in the wake of the COVID-19 pandemic is the use of multifamily bridge loans. People should keep in mind that there are major differences between these loans and conventional loans. Bridge loans are secured by using real estate as collateral.

Multifamily bridge loans can be a quick and flexible option if you have the real estate capital ready and available. Also, with these types of loans, time can play a critical role. Time can play a significant role in how the loan works out in the long run.

Multifamily bridge loans are ideal for borrowers who need cash in 30 days or less. Most traditional lenders and federal agencies may have a timeline that does not correspond with the borrower's needs. If you do your homework, you can find many reasonable bridge loans to fit your situation. The ones with convenient exit strategies are probably the best depending on your need.

The amount that can be secured through a bridge loan can vary wildly. Borrowers can get anywhere from hundreds of thousands of dollars to millions.

While multifamily bridge loans can be vital and advantageous, there are pros and cons that should be considered:

Multifamily bridge loan pros -

  • Borrowers can get quick short-term financing.
  • Unlike traditional lenders, the debt to income ratio is less important if you have collateral.
  • Loans are flexible and provide low-interest rates.
  • Multifamly bridge loans require much less documentation.
  • Bridge loans deal primarily with interest. There is usually no interest and when it matures, the entire principle is due.

Multifamily bridge loan cons -

  • A multifamily bridge loan can have higher interest rates. The risks are higher and the mortgage rates are also higher.
  • Unlike traditional loans, a large balloon payment is required at the end. This can have serious ramifications if you fail to make good on the loan.
  • If you are unable to make payments, your property can be siezed.
  • If you are approved for one loan that doesn't mean you will get another

If you want to finance a property, consider which type of multifamily bridge loan suits your individual needs. Make sure you fully understand the terms as well as the pros and cons. While multifamily bridge loans may provide more flexibility and ease, there can be pitfalls.