Why should savvy lenders look to bridge loans at this time?
We just recently had a conversation with a non-QM lender that had shifted everything over to bridge lending. This was so they could make bigger loans with less risk involved, particularly with 6- or 12-month interest-only bridge loans. This scenario also creates great churn and burn on capital and is perfect for today’s environment with high-interest rates.
As you know, these loans provide short-term, IO financing to provide funds in the following ways:
- For repairs and cosmetic improvements
To provide financing as a transition from a construction loan to permanent financing; and/or - To provide working capital for a borrower’s business operations.
However, borrowers are not eager to get into long-term high-interest-rate loans; lenders have tightening capital limitations, so lenders are lowering the LTV ratio for their loans (resulting in lower loan amounts).
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Meeting in the Middle
With fewer conventional loan funds available, lenders and borrowers can meet in the middle with short-term interest-only bridge loans. These options can help all parties get through these tough economic times with less exposure to risk. Bridge loans also provide short-term relief for non-QM borrowers who want interest-only funds to acquire and improve 1-4 unit rental properties without having to commit to long-term, high-interest rate financing.
These loan options will also prove beneficial to developers looking for short-term financing for new MFH and retail projects that are leasing up more slowly and, thus, are not stabilized sufficiently to qualify for a favorable permanent loan. With economic uncertainty as prevalent as it is right now, lenders can benefit from catering to these niche borrower needs with bridge loans.
GoDocs Cloud Technology — Built-in Features to Support Any Bridge Loan Scenario
The GoDocs solution accelerates bridge loan documentation at a fraction of what attorneys charge. Our SaaS platform allows commercial lenders to effortlessly generate comprehensive bridge loan documents within minutes, ensuring compliance with regulations across all 50 states.
GoDocs fully addresses the intricacies inherent in bridge lending, making the entire process efficient and hassle-free for even the most complex bridge loan scenarios:
- Short term bridge loan options (i.e., 6-12 months) that can include a built-in extension (i.e., 3, 6 or 12 months).
- Short term bridge loan option can roll into a 3- or 5-year mini-perm loan.
- A hold back of loan funds to pay for improvements and repairs with proper disbursement controls and loan balancing provisions without the need of a full set of construction loan docs.
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