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A bridge loan is a special type of loan granted by non-traditional lenders (legal financial firms and not banks) when their clients have an immediate need for financing.

Its main characteristic is that it has a temporary nature, until a second definitive loan is formalized.

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The main requirement to qualify for a loan of this type is that a future income can be assured. In other words, the interested party must guarantee the repayment of the loan. Without this guarantee, no entity will grant the financing.

What is a bridge loan for?

Bridge loans are also known as "bridge mortgages", since their main purpose is to provide liquidity to someone who wants to buy a home without having to sell his home quickly in order to be able to cover some type of advance payment (for example, in the case of homes that have not yet been built).

Thanks to bridge loans, the borrower can sell his home in a more relaxed and unhurried manner. Most financial entities grant a term of between two and five years to make the sale effective, which is more than enough time to get a good offer and not sell the house at any price.

How is a bridge loan different from a regular loan?

Bridge loans usually end up being integrated into the mortgage of the new home being purchased. This makes things much easier, since the debtor, if he does not want to, does not have to pay a normal installment (in which interest plus principal are amortized) as he would do with a personal loan.

On the other hand, a bridge loan can be paid with a grace period (no capital is amortized and only interest is paid); or with a special reduced installment, that is, the installment to be paid is lower than the one that will be paid when taking out the mortgage (and most of it corresponds to interest).

Almost everyone who takes out a loan of this type chooses to pay only the interest. They pay back the principal when they sell the house and formalize the mortgage.

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When is it appropriate to use this type of loan?

Borrowers often turn to this type of financing when they want to buy a new home but have trouble selling their current home. Lenders can approve you in as little as 1-2 weeks, and you'll get the cash you need to close the deal. Having quick access to cash is especially beneficial in competitive real estate markets.

Bridge loans can also help you secure a home, as you can submit an offer without a financial contingency. Sellers will likely give preference to your offer over others who will only buy if they can sell their homes.

In addition, you can use this type of financing to cover part of the cost of your new home. Let's say you have enough to pay most of the down payment. However, you need a little more to cover the rest, plus closing costs. Borrowing a smaller amount will make repayment much easier.

Looking for a private lender?

Tower Fund Capital is one of the solutions to your loan access problem. With their services you will be able to access hard money loans for real estate investments or bridge loans.

The transparency with which Tower Fund Capital works with its clients and partners has made it one of the top mortgage lenders in the industry.

Log on to the website today and apply for a meeting with the team of advisors. They will help you find the right plan for your investment.


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