Bridge loans are predominantly used for commercial real estate purchases and such loans are taken to quickly close on a property deal, retrieve real estate from foreclosure, or take complete advantage of a short-term opportunity in order to secure long term financing and benefits. Bridge loan on a property is bound to be paid back when the property is sold, refinanced with a traditional lender, the borrower's creditworthiness improves, the property is improved or completed, or there is a specific improvement or change that allows a permanent or subsequent round of mortgage financing to occur.
One of the primary characteristics of a bridge loan is that it may be close which implies that it is available for a predetermined time frame or open and being open implies that there is no fixed payoff date. Bridge loans are usually more expensive than conventional loans because of higher interest rate and the interest rates are usually 12-15%, with definite terms of up to 3 years.
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