LOAN PROGRAMS
ABOUT
BRIDGE
Similar to a conventional loan, a bridge loan is a form of debt financing that can be used to acquire or refinance all commercial property types including, but not limited to: multifamily, hospitality, office, industrial, retail, mixed-use, and self storage.
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Like conventional loans, bridge loans are also funded by traditional financial institutions such as commercial and investment banks, credit unions, and savings and loan associations.
However, bridge loans differ from conventional loans when it comes to rates and terms. Most bridge loans are short-term, meaning less than five years, and have a higher interest rate than a conventional loan.
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Bridge loans are ideal for borrowers who may not have pristine credit or less-than-perfect properties.
Borrowers include small business owners, real estate owners and investors, corporations, and joint venture partnerships.
WHAT IS A BRIDGE LOAN?
10 MUST-KNOW FINANCE TERMS
1.
Amortization
The process of paying the principal and interest on a loan through regularly scheduled installments.
2.
Balloon payment
A loan that involves small payments for a certain period of time and one large payment for the remaining principal balance, due at a time specified in the contract.
3.
Basis points (bps)
1/100th of 1% (0.01%), typically stated as a number of basis points over an index rate.
4.
Loan-to-value (LTV)
The ratio between the loan amount and the value of the property. The ratio is commonly expressed to a potential borrower as the percentage of value a lender is willing to finance.
5.
Lock-out period
A period of time after loan closing during which a borrower cannot prepay the loan.
6.
Non-conforming loan
A mortgage loan that does not conform to regulatory limits such as loan amount, loan-to-value ratio, and other characteristics.
7.
Recourse
A loan for which the borrower is personally liable for payment if the borrower defaults.
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8.
PITI
Principal, interest, taxes and insurance, the four components of a mortgage payment.
9.
Prepayment penalty
A penalty sometimes charged to a borrower who makes a prepayment.
10.
Replacement reserves
Monthly deposits that a lender may require a borrower to place in an account for future capital improvements of major building systems; i.e., HVAC, parking lot, carpets, roof, etc.