Base Interest Rate

The headline rate—typically quoted as annual percentage—represents your ongoing cost of capital. Most bridge lenders quote rates between 10-18%, with the specific rate depending on deal characteristics, borrower profile, and market conditions. Rates are usually structured as a spread over a base rate (Prime or SOFR) or as a fixed rate for the loan term. Interest-only payments are standard, meaning you pay only interest monthly with principal due at maturity. This structure minimizes monthly cash outflow but requires a clear plan for the balloon payment.

Origination Points

Origination fees—typically 1-3 points (1-3% of loan amount)—represent upfront costs paid at closing. On a $500,000 bridge loan, 2 points means $10,000 in origination fees. These fees compensate lenders for underwriting, due diligence, and the administrative work of setting up the loan. Some lenders offer lower rates with higher points, or vice versa—the right trade-off depends on how long you expect to hold the loan. Shorter hold periods favor lower points; longer holds favor lower rates.

Exit Fees and Prepayment Terms

Some bridge loans include exit fees (additional points paid when you pay off the loan) or prepayment penalties. Others offer "no prepayment penalty" but build that flexibility into higher rates or origination costs. Minimum interest provisions guarantee the lender receives a certain amount of interest regardless of when you pay off—typically 3-6 months. Understanding these terms matters because your actual cost depends heavily on how long you hold the loan. A loan that looks expensive on paper might be cheaper if you can pay it off quickly without penalty.

Additional Costs

Beyond lender fees, bridge loans involve third-party costs: appraisals ($500-3,000 depending on property complexity), legal fees for document preparation and review, title insurance, and potentially environmental assessments. These costs apply regardless of which lender you choose, but they add to your total financing expense. Budget 2-4% of loan amount for total closing costs including all fees and third-party expenses.

Loan-to-Value Ratio

LTV is the single biggest factor in bridge loan pricing. A 60% LTV loan (borrowing $600,000 against a $1 million property) carries significantly lower rates than an 80% LTV loan on the same property. The math is simple: lower LTV means more equity cushion protecting the lender if something goes wrong. Expect rates to increase 0.5-1% for each 5% increase in LTV above 65%. If you can bring more equity to the table, you'll save substantially on financing costs.

Property Type and Location

Lenders price risk based on how easily they could sell the property if you default. Multifamily properties in strong markets command the best rates because they're liquid and generate predictable income. Single-tenant retail in secondary markets carries higher rates due to limited buyer pools and income concentration risk. Rural properties, specialized industrial facilities, and unique assets face rate premiums that reflect their illiquidity. The same borrower with the same credit profile will see different rates depending on what they're financing.

Borrower Experience and Credit

Experienced borrowers with track records of successful projects receive better rates than first-time investors. Lenders know that experienced operators are more likely to execute their business plans and less likely to make costly mistakes. Credit score matters but less than in conventional lending—a borrower with 650 credit but 20 years of real estate experience often gets better terms than someone with 750 credit but no track record. Demonstrating relevant experience through past projects, property management history, or professional background can meaningfully reduce your rate.

Exit Strategy Strength

A clear, credible exit strategy reduces perceived risk and improves pricing. If you're planning to refinance, showing preliminary approval from a permanent lender strengthens your position. If you're planning to sell, providing comparable sales data and realistic timeline estimates helps. Vague exit strategies—"we'll figure it out when we get there"—result in higher rates because lenders price in the uncertainty. The more concrete your repayment plan, the better your rate.

Bank Bridge Loans

Some banks offer bridge financing, typically at the lowest rates (8-12%) but with the most restrictive requirements. Bank bridge loans usually require existing banking relationships, strong credit profiles, and properties that fit conventional parameters. Approval takes longer (3-6 weeks typically) and documentation requirements are extensive. If you qualify and have time, bank bridge loans offer the best pricing—but many borrowers who need bridge financing don't fit bank criteria.

Institutional Bridge Lenders

Debt funds and institutional bridge lenders offer rates in the 10-14% range with faster execution (2-4 weeks) and more flexibility than banks. They handle larger transactions and have standardized processes that create predictability. These lenders work well for straightforward deals where the borrower needs speed but the transaction itself is relatively conventional. They're less accommodating of unusual situations or borrowers with significant credit challenges.

Private Bridge Lenders

Private lenders—individuals or small funds—offer the most flexibility but typically charge 14-18% rates with 2-4 points. They can close in days rather than weeks and will consider deals that institutional lenders won't touch. For borrowers with credit challenges, unusual properties, or extremely time-sensitive situations, private lenders may be the only option. The premium you pay buys flexibility and speed that has real value when you're competing for deals or facing tight deadlines.

The All-In Cost Calculation

To compare options accurately, calculate total cost including all fees and interest over your expected hold period. For a $500,000 loan held 9 months: Option A at 12% rate with 2 points costs $45,000 in interest plus $10,000 in points = $55,000 total. Option B at 14% rate with 1 point costs $52,500 in interest plus $5,000 in points = $57,500 total. Option A wins despite higher points because the lower rate saves more over 9 months. But if you paid off in 3 months, Option B would be cheaper. Run the numbers for your specific timeline.

Opportunity Cost Consideration

Sometimes the cheapest financing isn't the best choice. If a bank bridge loan takes 6 weeks to close but a private lender can close in 10 days, the private lender's higher rate might be worth paying to capture a time-sensitive opportunity. Calculate what you'd lose by waiting for cheaper financing—lost deals, higher purchase prices due to competition, or missed market timing. Bridge financing exists because time has value, and sometimes paying more for speed creates better overall returns.

When Bridge Rates Make Sense

Bridge financing makes economic sense when the deal's returns exceed the financing cost by a meaningful margin. A fix-and-flip project with $100,000 projected profit can easily absorb $30,000 in bridge financing costs. A value-add apartment acquisition where you'll increase NOI by 40% justifies premium financing to capture the opportunity. But using expensive bridge financing for marginal deals—where success requires everything going perfectly—often leads to disappointment. Be honest about whether your deal's economics support bridge-level financing costs.