It seems as though everyone is flocking to Miami to invest in real estate. If you want to get in on the action and build your portfolio in one of the nation’s hottest real estate markets, you should consider using a bridge loan to make it happen.
Here’s everything you need to know about bridge loans in Miami:
What Is a Bridge Loan?
A bridge loan is a temporary lending solution designed to “bridge the gap” between closing and securing permanent financing. Bridge loans typically come with one-year terms, during which the borrower makes payments only on the accrued interest.
Bridge loans offer lower interest rates compared to comparable loan types like hard money loans, with rates averaging between 6% and 10% depending on your financial profile.
How Does a Bridge Loan Work?
Now that you know more about what a bridge loan is, let’s talk about how it actually works in practice:
Step 1: Receive the Loan
You start by receiving the funds from the bridge loan, just like any other loan. However, you can often receive the funds from your bridge loan faster than a conventional loan — taking days rather than weeks or even months.
Step 2: Make Payments on the Loan
After you have received your bridge loan, you begin to make your monthly loan payments. These payments aren’t designed to cover the cost of the principal and the interest since that would be impossible with a one-year term.
Instead, the payments only cover the interest that you’re accruing on the loan.
Step 3: Pay Off the Loan
Once you’ve secured permanent financing, you can then pay off the remaining balance of your bridge loan. At that point, you start making monthly payments over a longer term that cover both your principal and accrued interest.
Once a bridge loan reaches maturity there are a few commons options we see when it comes to paying off the loan:
- Refinance with a conventional loan
- Refinance with another bridge loan (or request an extension)
- Sale of the asset
- Using income from other ventures to pay off the loan
Why Use a Bridge Loan in Miami?
If you’re wondering why you should use a bridge loan to finance real estate in Miami, here are some of the unique benefits they offer compared to other types of loans:
Reasonable Interest Rates
Bridge loans come with reasonable interest rates compared to similar types of loans. Take hard money loans, for example, that offer many of the same benefits as bridge loans but at much higher interest rates.
Interest rates for bridge loans tend to range from 6% to 10%, whereas a hard money loan may come with an interest rate of up to 15%.
Flexible Qualification Requirements
Bridge loans also come with more flexible qualification requirements compared to other types of loans. Take conventional loans, for example, that require you to have a specific credit score and debt-to-income ratio (DTI). Bridge lenders, on the other hand, focus more on the quality of the asset and liquidity of the sponsor.
Efficient Closing Timelines
Bridge loans provide you with efficient closing timelines that can help you compete in the fast-paced Miami real estate market. Conventional loans administered by big banks often take weeks to close, and there’s no real efficiency in the process.
Bridge lenders are able to work to expedite your closing if needed so that you can purchase your property in about 10 business days.
Finally, bridge loans provide you with tons of freedom in terms of the types of properties you can purchase. Instead of being limited to purchasing a primary residence property, you can use bridge loans to purchase investment properties and build your real estate portfolio across South Florida.
Bridge Loan Use Cases
One of the advantages of using a bridge loan to finance real estate is that it can be used to purchase different types of properties, including commercial properties and land for development.
1. Residential Properties
Whether you're looking to buy a luxury condo unit in Brickell or a waterfront property in Miami Beach, a bridge loan can help you close on your investment property in under 10 business days with no income documentation required. This is an ideal option for investors who want to compete with cash offers and/or need a short-term solution while they wait to get approved for long-term financing.
2. Commercial Properties
Whether you’re looking to finance a high-rise apartment complex in downtown Miami or a new shopping center in Coral Gables, a bridge loan can help make your commercial real estate project happen. You can make a more competitive offer with a bridge loan that can close quickly and beat out other commercial investors.
3. Land for Development
Whether you’re looking to purchase land in Pinecrest to build a spec home or land in Midtown to build a brand new office complex, a bridge loan is the ideal solution. Most traditional lenders do not lend on land. However, with a bridge loan, you can secure up to 65% financing for residential or commercial sites.
5 Examples of Bridge Loans in Miami
Let’s see what Miami bridge loans look like in action with these five examples of actual projects:
1. Palm Beach Post Repositioning
A $20,300,000 bridge loan was used to finance the purchase of the former office space of the Palm Beach Post in West Palm Beach.
This space is now slated to become a mixed-use retail and office space with 125,000 square feet of retail space and 140,000 square feet of office space. A bridge loan was ideal for this project as it was subject to a ground lease and was experiencing low occupancy.
2. The Crystal Boutique Condos
An $11,700,000 bridge loan was used to finance the purchase of a six-unit boutique condo complex known as the Crystal. Also located in West Palm Beach, this complex features stunning waterfront views and high-end amenities.
A bridge loan was ideal for this project as it was not yet finished. Now, the client plans to finish the units and sell them.
3. 1212 Aventura
An $11,070,739 bridge loan was used to finance the purchase of a parcel of land known as “1212 Aventura.” This land is to become a mixed-use development consisting of senior living, office condos, and a marketplace in Aventura.
A bridge loan was ideal for this project as the land was acquired through multiple purchases and multiple entities. Thus, a large blanket loan was needed.
4. Beach House 8 Condos
A $9,000,000 bridge loan was used to finance the purchase of a penthouse condo unit in the Beach House 8 complex located in Miami Beach. This 4,645 square foot unit comes with five bedrooms, six bathrooms, three floors, and 6,000 square feet of outdoor space.
A bridge loan was ideal for this project as the borrower was a foreign national and, as a result, was having trouble securing a loan of that size.
5. Turnberry Ocean Club
A $3,355,000 bridge loan was used to finance the purchase of a luxury condo unit at the Turnberry Ocean Club located in Sunny Isles Beach. This four bedroom five and a half bathroom unit has over 3,600 square feet complete with high-end features and finishes.
A bridge loan was ideal for this project as the borrower was also an international borrower without credit history in the United States. The client also needed to close quickly as the original financing unexpectedly fell through.
Where to Get a Bridge Loan in Miami?
If you’re having trouble finding a bridge loan in Miami, here’s some information to help you look in the right places:
Traditional Lenders vs. Private Lenders
Bridge loans may be offered by both traditional lenders and private lenders. However, a bridge loan is considered a unique loan product and, therefore, isn’t always offered by traditional lenders like big banks. Instead, big banks tend to focus on conventional loans.
Another bridge loan route involves going with a private lender. Private lenders often offer more niche loan products, including bridge loans. Some lenders may even specialize in bridge loans.
Private Miami-Based Lender: Vaster
Vaster is a Miami-based lender specializing in bridge loans and portfolio financing. Since we are a private lender, we are able to offer our clients more flexible loan terms and more efficient closing timelines.
We were founded in 2017 and are backed by two of South Florida’s most influential real estate development firms: The Related Group and the Fortune International Group.
Our team has decades of combined experience in the mortgage industry and the South Florida real estate market. As a result, we understand and cater to the needs of individual borrowers, mortgage brokers, and realtors.
Vaster offers top-notch loan services that are unrivaled in Miami and the state of Florida. We prioritize total transparency throughout the entire loan process, giving you full visibility of the fees and costs of your mortgage.
We offer a simple and streamlined process from application to closing, updating you at every step along the way. We provide personalized assistance to meet the diverse and complex needs of our clients.
How to Get a Bridge Loan in Miami?
Get a bridge loan in Miami by following these six steps:
Step 1: Consider Qualifications
The first step toward getting a bridge loan in Miami involves considering your qualifications. After all, you don’t want to spend time pursuing this method of financing only to find out that you don’t qualify.
The good news is that bridge loans come with more flexible qualification requirements compared to conventional loans. Therefore, more people are able to qualify for a bridge loan despite past financial difficulties.
Bridge loan qualifications aren't too focused on credit score. At Vaster, we work with several clients with no credit history. We do run credit to ensure there are no previous bankruptcies or foreclosures, but we don't have a credit score requirement, nor do we verify income.
What we do need to verify is liquidity. We're going to need a copy of their latest bank statements, and we will need to see at least six months’ worth of interest payments in order to proceed with the loan.
Step 2: Find a Property
Once you’re confident that you can qualify for a bridge loan, you can start looking for the perfect property. Whether you’re looking to invest in a commercial property or a new construction condo build your dream home from scratch, a bridge loan can help you make it happen.
In the meantime, it’s a good idea to work with a buyer’s agent to help you find properties in the Miami area that meet your needs and budget. Be sure to work with a buyer’s agent who has extensive experience in South Florida and knows the market well. They will be able to help you compete in an extremely fast-paced and hot market.
Step 3: Gather Documents
After you’ve found the perfect property, you need to start preparing for your loan by gathering relevant financial documents. Most bridge lenders will ask to see tons of documents. At Vaster, we verify liquidity. So, instead of asking for income and tax documents, we will request copies of your bank statements.
Lenders want to ensure that you have the cash reserves to cover your monthly mortgage payments. Keep in mind that most bridge lenders will require you to hold the title of the property through a single purpose LLC/Corp.
There will be a request for entity documents to verify that the LLC/Corporation has been created correctly. Gathering this documentation now will make the actual application process much easier and quicker.
Step 4: Apply for the Loan
Now that you have your documentation in order, it’s time to apply for your bridge loan. Vaster makes it extremely easy for you to apply for your bridge loan all online.
Simply go to our website and click on “apply now,” then follow these steps:
- Choose the purpose of your loan between purchasing, refinancing, or cash-out refinancing.
- Determine how soon you would like to close on your loan and indicate your progress in your property search.
- Choose your requested loan amount between $100,000 to $5,000,000.
- Choose the estimated value or purchase price of the property between $200,000 to $20,000,000.
- Choose the property type between a single-family home, a townhome, or a condominium.
- Enter the property address if you have it.
- Select your credit profile between an “excellent” score above 720, a “good” score from 660 to 720, an “average” score from 620 to 659, a “below average” score from 580 to 619, or a “poor” score below 579.
- Enter your full name, email address, and phone number so that Vaster can contact you about your application.
Step 5: Underwriting Process
After you submit your loan application, the lender will then consider the merits of your application and make the decision to approve or deny your request. If your application is approved, then you move on to the underwriting process.
During the underwriting process, the lender will verify all the information you presented in your initial application. For example, they look into your financial statements, verify your employment, and thoroughly check your bank statements.
Another important aspect of the underwriting process is the property appraisal. Bridge lenders in Miami and elsewhere require an appraisal to make sure that they aren’t lending you more than the property is actually worth.
A professional appraiser will come to look at the property and take notes on its condition, location, and features. From there, they will find comparable properties that have recently sold in the area to come up with the appraised value.
So long as the appraised value is equal to or greater than your purchase price, you should be set to close on your loan. Note that if the appraised value is less than the purchase price, you may have to come up with the difference on your own.
Step 6: Close on the Loan
Once you’ve cleared the underwriting process, it’s finally time to close on your bridge loan and get the keys to your new property. Before you do so, it’s always a good idea to schedule a final walkthrough of the property to make sure that it’s still in good condition and that all contingencies have been met.
For example, if you established that the seller was to leave certain appliances or fixtures, you need to verify that they were actually left during the final walkthrough. You can also use the final walkthrough to verify that the seller didn’t leave anything that they were supposed to take since getting rid of unnecessary items can be annoying and costly.
If everything is good to go after the final walkthrough, you attend the closing, during which time you sign your loan documents, pay your down payment and closing costs, and obtain official ownership of the property.
Miami Bridge Loans With Vaster
Don’t waste another second on the sidelines of the Miami real estate market. Jump in and take advantage of low interest rates with a bridge loan from Vaster.
If you’re ready, you can start your application today, or you can speak with our lending experts for more information and guidance on how to move forward.
Is a Bridge Loan Right for You? | Forbes
7 Documents You Need When Applying for a Home Loan | Credit Karma
Underwriting Definition | Investopedia