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Bridge Loan Rates: Current Rates

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Interest rates are constantly changing which means that they can be hard to keep up with. Now’s the time to act on low bridge loan rates so that you can quickly and easily purchase the property of your dreams. 

What Are Bridge Loans?

Bridge loans are temporary financing solutions for both homebuyers and investors alike. They are designed to “bridge the gap” and provide the borrower with the quick and easy cash they need to close on a property. Bridge loans typically have terms of one year — but can be as short as six months and as long as 18 months. 

What Are Bridge Loan Rates Right Now?

Bridge loan rates currently range from 6 to 10% depending on both the lender and the borrower. And while these rates may be higher than those seen with other types of loans, it’s important to consider the benefits of bridge loans: 

  • Bridge loans offer quick closings that allow you to keep up in such a fast-paced real estate market. 
  • Bridge loans offer more flexible requirements and don’t base your entire application on your credit score. 
  • Bridge loans are short-term in nature and are designed to be paid off quickly so that you won’t accrue large amounts of interest. 

What Were Bridge Loan Rates in the Past?

We keep hearing that interest rates are at record lows, is that also true with bridge loans? There’s really never been a better time to get a bridge loan. However, it can be difficult to know where to look for a bridge loan — which is why we’re here to help. 

Where Can You Get the Best Bridge Loan Rates?

Not many lenders offer bridge loans. So where can you find the best lenders that offer the best interest rates? The best place to look is online! Just run a simple search for bridge lenders and see what comes up! 

Narrowing down your list of contenders can also be challenging if you don’t know what to look for. You should look for a lender that is experienced in this area, provides excellent customer service, and is completely transparent about their terms. 

Vaster is a premier bridge lender that has helped finance some of the biggest commercial real estate projects in South Florida. They are committed to providing personalized assistance to applicants and borrowers alike. They are also committed to fast closings thanks to a simple and refined process. Best of all, they offer competitive interest rates and are willing to work with applicants of all backgrounds. 

How to Get the Best Bridge Loan Rates?

It’s possible to get the best bridge loan rates with a strategic and patient approach. Here’s what you need to do: 

1. Boost Your Credit Score

One of the most important components in your bridge loan application is your credit score. Your lender will check your credit score and look at your credit history to determine if you’re a trustworthy borrower. Red flags in your history like defaults or bankruptcies could easily result in higher interest rates. 

Just because you can qualify for a bridge loan with a lower credit score doesn’t necessarily mean that you should since you will be paying more in interest as a result. Instead, you should take action to improve your credit score to above 700 if you want to get the best rates. 

2. Improve Your Debt-to-Income Ratio

If you want to both boost your credit score and improve your overall loan application, then you need to reduce your debt-to-income ratio. Not only does paying off debts like credit cards improve your score, but it also reduces your debt-to-income ratio. Also known as DTI, lenders are generally looking for a ratio lower than 36% — with no more than 28% going toward housing costs. 

So before you spend any extra cash on needless purchases, consider putting that money towards any debts that you have — including auto loans, student loans, credit cards, medical debt, etc. 

3. Build Up Your Assets

Another way that you can get a better bridge loan interest rate is to build up your assets. Having substantial assets can compensate for weak areas of your application. For instance, if you have a low credit score but substantial assets, your lender will see you as less of a risk and will offer you a lower interest rate. 

To do this, you may want to consider selling unneeded items, including things like cars, boats, jewelry, tools, art, clothes, and more. This extra cash in your account will make you a more appealing borrower to lenders. 

4. Earn More Income

If you’re looking to boost your assets and improve your DTI, you can also try to earn more income. Obviously, this is easier said than done. However, you could always ask your employer for a raise or promotion if you’ve been working extra hard. If your current employer is unable to give you a raise or a promotion, you may be able to find a better-paying position with another company. 

Another way to earn more income is to pick up a side hustle. You could try driving for Uber, Lyft, DoorDash, or Instacart. You could freelance online. You could walk dogs or pet sit. There are tons of side hustles out there to help you earn extra money that you can put towards a home. 

5. Put More Money Down

Finally, you can put more money down to get a better interest rate. Putting more money down reduces the overall value of the loan — and the risk to the lender. If you’re able to put 20% down, you can receive the best interest rates from your lender. 

How Much Do Bridge Loans Cost Overall?

Loans cost more than you think! It’s important to know exactly what your loan is going to cost so that you can comfortably make payments. Here are some extra costs associated with bridge loans that you might not be aware of: 

Points

You may be able to get a lower interest rate on your bridge loan by buying “points” from your lender. For instance, you may be able to pay an extra $1,000 for a 1% reduction in your interest rate. Depending on the value of your loan and the amount of money you have to spare, it may be worthwhile to purchase points if it will save you a substantial amount of money in interest at the end of the day. On the other hand, if buying points wouldn’t save you that much money, you definitely don’t have to do it. 

Closing Costs and Fees

All loans come with closing costs — bridge loans are no different. However, many borrowers are caught off guard by closing costs when it’s time to close on their loan. Generally speaking, you can expect to pay anywhere from 2 to 5% of the value of the loan in closing costs. Closing costs cover things like loan origination fees, recording fees, credit report fees, and more. In addition, you may have to pay out of pocket for things like the appraisal, inspection, and survey. 

All of these different costs can add up quickly. So if you have a bridge loan of $300,000, you can expect to pay $6,000 to $15,000 in closing costs. This is quite a big range so make sure that you understand your specific lender’s closing costs so that you can be prepared with the money come closing day. 

Interest

We have talked a lot about interest rates, but we haven’t really talked about why interest rates are so important. A seemingly small difference in your rate can easily translate into thousands of dollars depending on the value of your loan. 

For instance, say that you have a bridge loan of $300,000 with an interest rate of 8% and a balloon payment due in 12 months. Your interest-only payments would be $2,000 a month for a total of $24,000 before the balloon payment is due. On the other hand, if your interest rate is 9% with all other factors equal, your interest-only payments would be $2,250 a month for a total of $27,000 before the balloon payment is due. Based on these calculations, an interest rate of just 1% higher can translate into paying $3,000 more in interest over the life of the loan. 

Wrap Up on Bridge Loan Rates

For the best bridge loan rates, reach out to Vaster for more information on how to apply. Our financial experts are ready and willing to help find the right financing solution for your unique situation. 

 

Sources:

How to Get the Best Mortgage Rate | NerdWallet

Mortgage Points: What's the Point? | Investopedia

Bridge Loan Calculator | Mortgage Calculator

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