What is a Bridge Loan? In Layman’s Terms

[Corey Dutton]

Most people in this group know the answer to this question. But most of the general public has no idea what a bridge loan is. In fact, I was at a BBQ this weekend when someone asked me what type of loans I provide and I said, “bridge loans.” He really thought I provided loans to construct bridges !! This was embarrassing to have to explain to him actually. But it dawned on me that most people just don’t speak the real estate lingo.

Simply put, a bridge loan is nothing more than a short-term, interim loan that “bridges” you to the next stage of financing, or hopefully, permanent financing. It is typically more expensive than a bank loan, but can fund more quickly than a bank loan. A bridge loan is commonly used to take advantage of opportunities that will go away if funding is not immediately available.

Although I’ve pretty much defined it, would anyone like to define a bridge loan in more layman’s terms? Or, have you used a bridge loan recently for a project or a purchase? Please share how you used this loan to accomplish specific goals.

[Manuel A.]

Based on your definition, maybe this would help them understand:

Person 1: "Hey Corey, what is a bridge loan? I can't believe you want to build a bridge? That's great..."

Corey: "I'm not building a bridge! A bridge loan is this:

If a mortgage lender told me I need more of my own cash to get a loan, I would go get a bridge loan that will give me enough funds to get approved for financing from the mortgage lender. Thus "bridging", or allowing, the loan to happen and giving me the ability to get funded."

Person 1: "Rrrrriiiiiggghhht... So when are you going to start building your bridge?"

Corey: *With a blank stare* "Tomorrow my friend, tomorrow..."

Haha, or something like that, hope it's helpful. What do you think?