Bridge financing is temporary funding used when a permanent solution is expected but not yet in place. In real estate it commonly covers the gap between buying a new property and selling or refinancing another.
Because it is short-term and often secured by property, speed and flexibility matter more than long-term cost : but the cost should still be understood clearly before proceeding.
How it generally works
A bridge structure is underwritten primarily on the collateral property and the credible exit : the sale, refinance, or other event that will repay the funding. Terms are short, commonly measured in months.
Approval often moves faster than conventional financing because underwriting centers on the asset and exit rather than extensive income documentation.
Common uses
- Buying a new property before the current one sells
- Covering a gap until long-term financing is finalized
- Purchasing property that doesn't yet qualify for conventional financing, such as one needing renovation
- Funding a time-sensitive acquisition or auction purchase
- Completing a project before permanent take-out financing
Qualification factors providers commonly review
- Value and condition of the collateral property
- The credibility and timeline of the exit strategy
- Borrower experience with similar transactions
- Equity contribution in the transaction
- Existing liens and obligations on the property
Potential advantages and trade-offs
Advantages: speed, flexibility, and the ability to act when timing gaps would otherwise cost an opportunity.
Trade-offs: higher cost than long-term financing, a defined deadline to exit, and consequences if the exit : a sale or refinance : takes longer than planned.
How repayment is typically structured
Usually a single payoff at exit : from a sale, a refinance, or a scheduled maturity : with periodic cost payments during the term. Some structures allow the payoff to be deducted from sale proceeds at closing.