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Andrew LaSalla
Andrew LaSalla II is one of the most trusted financial consultants in the residential and commercial lending business. With over seven years of of property loan underwriting experience, Andrew's sole focus is helping clients successfully navigate complex financial laws, terms, rules, paperwork, and transactions necessary to secure loans for new construction, purchase, or refinancing of multifamily, healthcare, affordable housing and student housing properties. Whether it's HUD, FHA, or MAP loans, Andrew is committed to tailoring financial solutions for every client he serves.
Bridge loans are beneficial for investors with projects that need funds quickly. These types of loans fill a short-term gap between the funds a borrower needs now and a future permanent financing plan. Bridge loan terms and guidelines can be flexible for many circumstances and built to meet a variety of objectives.
Bridge Loan Financing
Obtaining funds from a traditional lender can be time-consuming; even after approval, it could be weeks before you can access funds. A bridge loan lender can help you get the money you need for your commercial or multifamily property while you wait for your long-term financing solution. Most bridge loan terms for multifamily and commercial real estate are typically between three months and three years.
It is essential that the lender offering the bridge loan has multiple exit strategies and is approved with FHA, Fannie Mae, Freddie Mac, and other financing avenues to exit the bridge loan. An experienced bridge loan lender will make sure that the loan is set up to meet the requirements of a permanent loan program. It’s important that you know the negotiable options for bridge loans upfront. Options to focus on include:
- Total loan proceeds
- Prepayment lockout
- Fees
- Terms
- Interest rate
- Recourse
- Leverage
Each of these options weighs on the others. It’s crucial that you connect with a lender that knows all the ins and outs of bridge loans, especially when working with the complexity that HUD offers.
Agency and Bridge Loans
Bridge loans are commonly used to acquire a project when a cash option is not feasible. An advantage of bridge loans is that they can close quickly. Agency loans have longer-terms and are used for refinancing and purchasing properties. Securing an agency loan can take more time, in some case 6 - 12 months or more.
Agency-based loans through FHA, HUD, Fannie Mae, and Freddie Mac have multiple advantages for investors and multifamily developers. They are used by many as a preferred long-term financing option.
Borrowers looking for FHA-insured loans that take 6 to 9 months to process may acquire the project using bridge financing. Additional advantages of agency financing include:
- Longer terms are available.
- They offer a 35-year fixed rate that is fully amortizing.
- Investors planning on holding the property long-term can take interest rate fluctuations out of the equation.
- FHA loans are non-recourse and are fully assumable.
- In a rising rate environment, this loan option is a great choice, and if the borrower decides to sell the property, it can add value.
- The buyer can assume the loan at a rate well below the current market.
Lastly, if a property is not performing well and does not meet FHA or agency financing guidelines, a borrower can obtain bridge financing. This will allow the borrower to address management and occupancy issues needed to stabilize the requirements to receive favorable long-term funding.
Agency and bridge loans will each have benefits and drawbacks. The most significant disadvantage of an agency loan is the lengthy approval process, forcing borrowers to make less-attractive financing choices.
Get More with a Bridge Loan
A bridge loan can be an excellent choice for investors who are looking for short-term funding before refinancing into a longer-term loan. Contact LSG Lending Advisors today for more information on bridge loans and how we can help you move your project from conception to completion.