Bridge Loan
A short-term loan that 'bridges' the gap until permanent financing or a sale. Common in investor real estate to acquire or stabilize a property fast, then refinance or sell.
A bridge loan is short-term financing that carries a borrower from one position to another — most often from a fast acquisition to permanent financing or a sale. The loan "bridges" the timing gap. Terms typically run 6 to 24 months, interest-only, with the full balance due as a balloon at maturity.
In investor real estate, bridge loans and hard money loans overlap heavily — both are asset-based, speed-focused, and short-term. The distinction is mostly one of emphasis: "hard money" stresses that the loan is collateral-driven; "bridge" stresses that it's temporary by design.
When investors use a bridge loan
- Speed acquisitions. Win a competitive or distressed deal by closing in days, then refinance into a DSCR loan once the dust settles.
- Stabilization. Buy a property with vacancy or deferred maintenance, lease it up or repair it, then refinance at a higher value.
- BRRRR bridging. Fund the buy-and-rehab phase with a bridge, then take cash out with a long-term refinance.
- Buy before you sell. Acquire the next property before the current one closes.
How a bridge loan is structured
| Feature | Typical |
|---|---|
| Term | 6–24 months |
| Payments | Interest-only |
| Payoff | Balloon at maturity (refinance or sale) |
| Rate | Higher than long-term financing |
| LTV | 70–80% of as-is value |
| Underwriting | Asset-first; light income docs |
The exit is everything
Because a bridge loan ends in a balloon, the exit strategy is the heart of the deal. Before taking one, know exactly how you'll pay it off — a confirmed refinance, a listing and sale, or a takeout commitment. A bridge loan with no credible exit is how investors get caught when the balloon comes due. Pair every bridge with a realistic timeline and a backstop in case the primary exit slips.
Frequently asked questions
What is the difference between a bridge loan and hard money?
They overlap almost entirely in investor real estate. Both are short-term, asset-based, and fast. 'Bridge' emphasizes that the financing is temporary until a sale or refinance; 'hard money' emphasizes that it's secured primarily by the property rather than the borrower's income.
How long is a bridge loan?
Most investor bridge loans run 6 to 24 months. They are interest-only with the principal due as a balloon at the end, repaid by refinancing into permanent financing or selling the property.
What happens if I can't refinance or sell before the balloon?
You may be able to negotiate an extension (often for a fee), but there's no guarantee. That's why a credible exit strategy is essential before taking a bridge loan. Always have a backup plan if your primary exit slips.