Bridge Loan

Bridge Loan — A bridge loan provides short-term capital to a borrower who needs to act quickly while arranging permanent financing. In real estate, bridge loans are frequently used by investors purchasing properties at auction, closing on new acquisitions before selling existing holdings, or funding renovations ahead of a refinance.

Because of their short duration — often six to twenty-four months — bridge loans carry elevated interest rates and may include origination fees or points. For note investors, understanding bridge-loan mechanics matters when evaluating borrower intent and repayment capacity on the underlying collateral. A performing bridge-loan note can be an attractive short-term investment, while a defaulted one may present a discounted acquisition opportunity.