How Does a Bridge Loan Work for Real Estate Investors?

Real estate investors often require quick financing solutions to seize opportunities in the competitive market. A short-term bridge loan is a popular option that helps investors navigate the gap between buying a property and securing permanent financing, or selling an existing property. 

But how does a bridge loan work? Read on to learn about the mechanics of bridge loans and how Dominion Financial Services can help you with your next project.

What Is a Bridge Loan?

Bridge loans are short-term financing options designed to bridge the gap for investors awaiting permanent financing or the proceeds from a property sale. These loans are characterized by their short duration — typically six months to one year — and higher interest rates, reflecting the increased risk assumed by lenders. 

Dominion Financial Services offers bridge loans with competitive terms, including interest rates at approximately 11%.

Types of Projects Suitable for Bridge Loans

Bridge loans are commonly used for:

  • Fix and Flip: Investors can quickly purchase, renovate, and resell properties.
  • Ground-Up Construction: Provides funding for new constructions until long-term financing can be secured or the property is sold.
  • Multifamily Investments: Supports the acquisition and renovation of multifamily units and apartments, enabling investors to later refinance under more favorable terms.

How Short-Term Bridge Loans Work

Investors submit an application that details the project and financials, with the property serving as collateral rather than relying strictly on the borrower’s income. Different lenders have their own terms and requirements. 

Dominion streamlines this process, offering pre-approvals within days and the ability to fund deals fast — sometimes in as little as 48 hours. Key terms include up to 90% loan-to-cost for purchase and 100% for rehab expenses. Loan payments are interest-only, with a balloon payment due at the end of the term.

Advantages of Bridge Loans

Many real estate business models depend on bridge loans for the advantages they provide over conventional home loans. These include:

  • Flexibility: Tailored to meet the specific needs of diverse real estate projects.
  • Speed: Fast funding ensures investors can capitalize on opportunities without delay.
  • Opportunity: Critical for investors to act swiftly in competitive markets.

Considerations Before Securing a Bridge Loan

Investors should have adequate financial reserves to use as operating capital throughout the various stages of construction, and scrutinize market conditions to confirm the investment’s profitability. Evaluating the feasibility and timeline of the project is also important. A borrower should have a planned exit strategy that aligns with the loan’s term. 

Why Choose Dominion Financial Services?

Dominion Financial Services offers bridge loans with significant benefits:

  • No Appraisal Required: Facilitates faster processing and closing times.
  • Competitive Financial Terms: Including specific interest rates and high loan-to-value ratios that are more favorable than many competitors.
  • Expertise and Personalized Service: With over two decades in business, Dominion has funded over $3 billion across more than 11,000 loans, demonstrating its capability and reliability.

Dominion’s approach to bridge loans emphasizes speed, flexibility, and adaptability, making it an ideal partner for real estate investors looking to capitalize on fast-moving real estate opportunities. Its commitment to providing tailored, efficient financing solutions ensures that investors can proceed with confidence backed by a lender that understands the nuances of real estate investment. 

Fast-track your investment goals with Dominion Financial’s bridge loans for fix-and-flips, new construction, and multifamily properties.

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