Bridge Loan Rates & Fees

How Much Does a Bridge Loan Cost?

Bridge Loan Cost Example

The total cost of a bridge loan is the sum of the interest paid over the time the loan is outstanding plus the upfront points and third-party fees charged to set it up.

Unfamiliar hard money terms are defined in our glossary. Because bridge loans are short-term, the interest is usually paid for only a matter of months, but the upfront costs are paid in full regardless of how quickly the loan is repaid.

A simple example shows how the pieces add up. Consider a $500,000 bridge loan held for six months. If the loan carries a 10 percent annual interest rate, the interest works out to roughly $4,167 per month, or about $25,000 over the six months. If the lender charges 2 points to originate the loan, that is another $10,000 paid at closing. Adding a couple thousand dollars in third-party fees brings the all-in cost into the range of $37,000 to $40,000 for that six-month period.

The same loan repaid in three months instead of six would cut the interest portion roughly in half, since interest accrues only while the balance is outstanding. The points and most closing fees, however, stay the same. This is why the length of time you actually hold a bridge loan has a large effect on its total price.

The bridge loan calculator takes a loan amount, a rate and a payoff month and returns the same total, so you can test a three-month hold against a six-month one before committing to either.

Adding Up Interest, Points, and Third-Party Fees

Three categories make up almost the entire cost of a bridge loan. Understanding each one makes it easier to compare offers and estimate your own total.

Interest is the ongoing charge for borrowing the money, expressed as an annual rate but paid monthly. Bridge loan rates are typically higher than conventional mortgage rates because the loans are short-term and often fund quickly on property equity rather than on a lengthy income review. The dollar amount of interest you pay depends on the rate, the loan balance, and how many months the loan is outstanding.

Points are an upfront fee charged by the lender to originate the loan, with one point equal to 1 percent of the loan amount. A loan with 1.5 to 3 points is common in short-term lending. Points are paid at closing and are not refunded if the loan is paid off early, so they represent a fixed cost regardless of the loan term.

Third-party fees are the remaining closing costs that go to parties other than the lender. These can include appraisal or valuation fees, escrow and title charges, recording fees and notary costs. Individually these items are small, but together they can add several thousand dollars to the total. When you ask a lender what a bridge loan will cost, it is worth requesting a written estimate that lists interest, points, and every third-party fee separately, so you can see the full price rather than the headline rate alone.

How to Get the Lowest Bridge Loan Rate

What Qualifies You for a Lower Rate

Bridge loan pricing is driven mostly by risk. The lower the risk a loan presents to the lender, the lower the rate a borrower can generally expect. Several factors move that risk up or down.

Equity in the property is usually the single biggest factor. Bridge loans are secured by real estate, so a lower loan-to-value ratio, meaning you are borrowing a smaller percentage of the property’s value, gives the lender a larger cushion and typically earns a better rate. A borrower requesting 30 percent of a property’s value will often see more favorable pricing than one requesting 70 percent or more.

A clear exit strategy also matters. Because a bridge loan is meant to be repaid quickly, lenders look closely at how the loan will be paid off, whether through the sale of a property, a refinance into longer-term financing or an incoming lump sum. A well-documented, realistic exit lowers the lender’s uncertainty and can support a lower rate. Other factors that can help include the type and condition of the property, the borrower’s experience with similar transactions, and overall market conditions at the time of the loan.

Comparing Bridge Loan Lenders and Offers

Because bridge loan terms vary widely between lenders, comparing more than one offer is the most reliable way to find a competitive rate. The key is to compare the full cost of each offer, not just the advertised interest rate.

Start by putting each offer in the same format. Ask every lender for the interest rate, the number of points and an itemized list of third-party fee. Then calculate the total cost over the length of time you expect to hold the loan. A loan with a higher rate but fewer points can end up being cheaper overall if the loan is repaid quickly. A loan with a low rate but a high amount of points and fees can cost more.

Beyond price, compare the terms that affect flexibility. Look at whether there is a prepayment penalty, since paying off a bridge loan early is common and a penalty can erase the savings from an early repayment. Check the loan term length, any extension options and their cost and how quickly the lender can actually fund. A bridge loan that can’t close fast enough may defeat the purpose of obtaining on to begin with. Weighing rate, upfront cost, and terms together gives a more accurate picture of which offer is genuinely the lowest cost.

Bridge Loan Fees

Bridge loan fees are charged in additional to the bridge loan rate. Bridge loan fees are typically in the form of “points”. 1 point is equal to 1 percent of the loan amount. Points for bridge loans are commonly in the range of 1.5-2.5. Some bridge loan lenders may also add junk fees to the loan in additional to the points. They are often called underwriting, processing or document fees. Other fees associated with a bridge loan would include standard real estate 3rd party fees such as escrow, title insurance, recording fees and notary fees.

Frequently Asked Questions

What is a Bridge Loan?

A bridge loan is short-term financing tool used to help a borrower pull equity from an existing property to help purchase a new property. Once the new property is purchased, the previous property is sold which automatically pays off the bridge loan. For a complete explanation, see what a bridge loan is and how it works.

What determines bridge loan rates in California?

Bridge loan rates are set by a combination of factors such as the loan-to-value ratio (LTV) of the property, the borrower’s strength and credit profile, the property type, and the loan term. Short-term private money loans have a higher interest rate range when compared to long-term traditional financing. As a direct lender, North Coast Financial evaluates each deal individually rather than applying rigid formula pricing. Deals with strong equity positions and clear exit strategies typically qualify for better rates.

How quickly can I lock in a rate?

In most cases, we can give you a tight interest rate range the same day you contact us. Because we are a direct lender and have been funding California bridge loans since 1981, we can provide quick quotes and be ready to move forward with the bridge loan in a matter of days.

What is the minimum loan size for a bridge loan?

North Coast Financial generally funds bridge loans starting at $30,000. We can generally lend up to $3-4 million for a single family residence but there is no specific maximum. Larger loans are evaluated on a case-by-case basis depending on property type and equity position. If you are unsure whether your deal qualifies, call us and we will give you a straight answer.

How long is a typical bridge loan term?

Residential bridge loans from North Coast Financial are short-term loans with terms up to 11 months. Investment/business purpose bridge loans may have longer terms of 12-24 months depending on the project. Bridge loans are designed to fill a financing gap until a property sells or longer-term financing is arranged, so the term is structured around your specific exit strategy.

How do bridge loan rates compare to traditional bank loans?

Bridge loan rates are higher than conventional bank rates because they are short-term, primarily asset-based loans funded without the lengthy underwriting process banks require. The trade-off is speed and flexibility. A bank may take 45 to 60 days and still decline the loan. North Coast Financial can often fund in as few as 5 to 7 days for investments while consumer purpose bridge loans have funding timeline of 2-2.5 weeks due to federal regulations. For investors who need to close quickly or who own properties that do not fit conventional lending criteria, the rate difference is usually justified by the cost of a missed deal.

The information provided herein is for educational purposes only. North Coast Financial is not providing any legal, tax or financial advice.