A Beginner's Guide to Bridge Loans

Bridge loans are defined different depending the context. For some, a bridge loan is a short-term loan that helps the borrower meet their short-term liquidity requirements while they try to secure permanent financing. For others, it can bridge a time period gap while improvements are made to the property or its finance ability. Banks and private money lenders, such as Altus Capital Group, offer bridge loans to their borrowers.

What is a Bridge Loan?

Bridge loans, also known as swing loans, may be used by homeowners who want to buy a new house before selling their existing property and need to make a down payment on their new home. They can also be used by businesses that need to cover operating expenses while trying to secure long-term funding. However, the most common use of bridge loans is by real estate investors who need to close quickly and with confidence with financing that can be in place through the improvement or repositioning stages of a real estate project. Bridge loans usually have higher interest rates than traditional long-term loans.

Most bridge loans are secured by the underlying real estate. The loan to purchase price (or in some cases valuation) varies by the type of real estate being offered as the collateral. For a single family residence, a bridge loan may provide all the way to 80% of the capital needed for purchase, while only providing less than 50% of the funds needed on a land purchase.

Bridge loans are typically offered with 1 to 2 year terms, but may be shorter in term and in some cases can be as long as 3 or 4 years.

Some bridge lenders will base the The loan amount depends on the borrower’s credit history income. In those cases the bridge loan qualification criteria may include an excellent credit score and a low debt-to-income ratio. Other bridge lenders, including most private lenders, are more focused on the collateral offered for the loan and the ensuring a safe loan to value ratio based on the collateral and the likelihood of default.

When to Use a Bridge Loan

  • Want to buy a new home, but the seller won’t accept your offer until you sell your current home.
  • Want to close on a new house before selling your current property.
  • Cannot afford a down payment on your new home without first selling your existing property.
  • Fix and Flip properties
  • Distressed real estate purchases
  • When a short escrow period is required
  • When not wanting to deal with the intrusive underwriting required by traditional lenders.

Private Money bridge loan interest rates vary depending on the asset quality, the loan to value, and to a lesser extent, the borrower’s creditworthiness. Additionally, interest rates will adjust with economic activity and interest costs in the broader economy. Real estate bridge loans current have interest rates ranging from 9 – 12%. Interest rates for business bridge loans usually range from 15-24%. Other costs include closing costs and administrative and legal expenses. Bridge loan closing costs, loan fees, and processing fees usually range from 2.5-4% of the total loan amount.

These costs usually include the following:

  • Escrow fee
  • Appraisal fee
  • Loan origination fee
  • Title policy costs
  • Notary fee
  • Document Preparation Fee

Bridge Loan Benefits:

  • Borrowers get immediate access to cash
  • The terms of a bridge loan can be tailored to the needs of the borrower
  • Faster approval and closing
  • Bridge loans can help business owners ensure smooth sailing while they try to secure long-term financing
  • Creative structuring to maximize borrower value

Altus Capital Group is a leading real estate lending company serving Rohnert Park. They are committed to expanding access to finance for real estate investors and offer tailored loans to borrower’s needs. To make an appointment, call (707) 932-5887.

Fix and flip loans are short-term loans used by real estate investors to buy and repair properties and then sell them for a profit. Private investors or investment funds, such as Altus Capital Group, offer such fix and flip loans. Investors often prefer to use private sources rather than banks and credit unions because of the speed and simplicity to close versus trying to obtain financing through a more traditional source. Additionally, unlike banks, companies such as Altus Capital are able to preapprove borrowers within certain criteria allowing buyers to confidently make offers with aggressive and attractive closing terms with confidence they will be able to close on the transaction. These loans include options like 401(k) loans and hard money loans, and established house flippers may use their line of credit to secure a loan.

Here are five reasons why a fix and flip loan may be the right choice for you:

  1. Flexible terms and conditions: Unlike bank loans, fix and flip loans offer flexible terms and conditions.
  2. Private lenders will often lend to investors even if they have been refused a loan by a traditional bank or credit union.
    • Application process is typically less complex, much quicker, and requires far less documentation than bank loans.
  3. Lower prepayment penalties: Traditional loans often penalize borrowers who pay off debt before the loan matures. However, since fix and flip loans are short-term loans, the prepayment penalty is usually lower or non-existent.
  4. Faster approval: A fix and flip loan can be approved much faster than a traditional bank loan, which means you can go ahead with your property deal as planned. Thought it is uncommon, companies like Altus Capital have been able to close loans in as little as three days.
  5. A variety of properties are allowed: Banks often have strict guidelines for the properties they approve for loans, whereas fix and flip loans can be used for almost any type of property, regardless of its current condition.

Altus Capital Group is a reputable hard money lender in Northern California, known for tailoring loan offerings to fit the unique needs of its clients. If you’re interested in learning more about how a fix and flip loan can benefit you, call (707) 932-5887 to schedule a consultation.

October 26, 2022

SANTA ROSA, CA – Altus Capital Group Inc (ACG) continues to build momentum with the addition of its new Director of Lending. Ian Tavelli joins ACG to help grow the company into a world-class private money lending platform.

Ian Tavelli is the former President and CFO of Tavelli Company. During his leadership tenure at the family-owned business, Ian interfaced with clients, set up debt collection processes and oversaw all operations for the company. Prior to running the collection agency with his father, Ian had worked in the credit and banking industry. He served at Assistant Vice President and Loan Officer in charge of business development at North Valley Bank prior to its merger with Tri Counties Bank where he had served as Relationship Manager. Ian’s background in banking analytics, cash flow and strategic growth combined with his entrepreneurial spirit and leadership skills provide him with the knowledge and expertise to develop and expand Altus Capital’s lending business. Ian earned his B.S. in Global Business Finance from Arizona State University.

“Altus has a proven track record of success within the real estate industry and I look forward to connecting our investor base with commercial and private lending opportunities.” -Ian Tavelli – Director of Lending, ACG

Forrest Jinks, ACG’s CEO, shared, “We have been bullish about the potential for the private money lending segment of our business for quite some time, but were deliberate in our search in bringing in additional resources in that we wanted someone that would be a great long term fit for Altus’s culture and vision. We believe we have found that person with Mr. Tavelli.”

About Altus Capital

Altus Capital was formed to satisfy the growing demand for alternative financing while offering its investors opportunities for relatively low risk real estate equity-based investment. With over twenty-five years of experience in real estate and finance, we’re able to creatively fund our borrower’s property or development project. For more information, please visit: https://altuscapitalgroup.com/.