Construction Bridge Loans

Written by Robert Mac
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Construction bridge loans are specific types of loans, usually short-term, for a specific construction project. Generally, people get a bridge loan when they are selling a home while buying another and need financing to secure the second one. They use the equity of the first for a temporary loan that allows them to close on the second home, after which they get other financing.

Although a little bit different, construction bridge loans are not for the acquisition of property, but for building a home or other structure. While the end result is the same--acquiring financing for property--they are nonetheless different; like most financing in the world of real estate, each type of funding is subject to its own definitions, qualifications, and restrictions.

Qualifying for Construction Bridge Loans

The only way to get construction bridge loans--or any bridge loan, for that matter--is by using existing assets as collateral to secure your loan. Bankers don't just give out money to anyone; you'll need to offer something to guarantee you'll repay it. In most cases, people use a home they are selling to qualify for a temporary loan, then use the loan to buy (or build) something else.

A typical bridge loan is short-term financing used before longer-term financing on the second property is made. In the case of a construction loan, the repayment schedule may be a bit longer, depending on the scale of the project. Construction loans are also different than "regular" bridge loans in that the borrower receives periodic payments from the lender during the building process rather than a one-time lump sum.

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