Bridge loans are short-term floating-rate commercial mortgages, typically 1 to 3 years with extension options, used to acquire, reposition, or stabilize a property before permanent financing . Built around a defined exit.
When bridge is the right answer
The property is not yet stabilized, vacancy too high, operating history too short, or the rent roll has too much rollover within 12 months for permanent financing.
The business plan requires execution: rehab, re-tenanting, lease-up, reflag of a hotel. 18 to 36 month plan that needs flexibility.
Acquisition speed: the seller needs certainty of execution and the buyer cannot wait the 60 to 120 days a permanent process would take.
Pricing
Plus origination 0.5% to 1.5% and exit fees 0.25% to 1.0% on debt fund bridge. Plus rate cap if required (typically capitalized into reserves).
Lender options
Banks may offer bridge financing based on property cash flow, the business plan, collateral and the borrower relationship. Compare the actual terms with other suitable lenders.
Specialty asset-class lenders: hotel-focused funds, single-family rental portfolios, niche commercial. Pricing varies by specialty.
The exit story
Always defined upfront. The bridge lender underwrites the exit; if there isn't a credible exit, there isn't a bridge loan.
Most common: take-out by agency (multifamily), CMBS or life co (other CRE), or bank perm (smaller balance, relationship). Less common: sale to a new sponsor on a value-add story.
The sponsor's underwriting at exit typically projects: stabilized NOI, exit cap rate / per-key / per-SF, exit DSCR/debt yield at projected take-out rate. The bridge lender stress-tests every assumption.
All-in cost vs. permanent
Bridge headline rate is materially higher than perm, 8% to 11% vs. 5.5% to 6.5%, but the relevant comparison is total carry over the planned hold plus prepayment cost at exit.
Bridge wins on flexibility for value-add programs and on exit timing certainty. Perm wins on long-term hold and predictability.
Process and timeline
Term sheet within 7 to 14 days of full package. Closing 30 to 60 days after signed term sheet. The fastest execution in CRE debt outside emergency bank deals.
Critical-path items: third-party reports (appraisal, environmental, engineering, typically 3 to 4 weeks), rate cap procurement (1 to 2 weeks), lender legal (2 to 3 weeks). Borrower-side prep, clean operating data, capex plan, exit narrative, should be ready before going to market.
Frequently asked questions
How long is a typical bridge loan?
Most bridge loans are structured as 24 to 36 months initial term with one or two 12-month extension options. Extensions typically require fee, paydown, and DSCR/debt-yield tests.
Do I need a rate cap on a bridge loan?
Almost always required by the lender. Cost depends on notional amount, strike, and term, typically capitalized into reserves at closing. Plan to renew the cap at extension.
Can I get non-recourse bridge?
Most institutional debt fund bridge is non-recourse with bad-boy carve-outs (and completion guarantee on construction). Bank bridge often has partial recourse (25% to 50% on the loan, dropping at stabilization).
Sources
- Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) · Board of Governors of the Federal Reserve System · 2026-Q1
- Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations · Mortgage Bankers Association · 2026-Q1
- Secured Overnight Financing Rate (SOFR) · Federal Reserve Bank of New York · daily
- Financial Stability Report · Board of Governors of the Federal Reserve System · 2025-11