How bridge loans work

What a bridge loan is

A bridge loan is a short-term real estate loan — typically 3 to 12 months — that "bridges" the gap between an immediate need for capital and a longer-term event: a sale, a refinance into bank financing, or the completion of a project. It is secured by a recorded deed of trust on the property, the same way a bank mortgage is.

The key difference from a bank loan is what drives the approval. Banks underwrite the borrower: tax returns, debt-to-income ratios, seasoning, committee review. Private lenders like Miller Bates underwrite the deal: the property's value, the equity cushion, and the exit plan. That's why a bridge loan may close in a matter of days rather than months, depending on due diligence, title work, and the specifics of the transaction.

When borrowers use one

• Time-sensitive purchases. A seller wants to close in two weeks; a bank needs sixty days. Bridge financing can allow the borrower to meet a compressed closing timeline and refinance later.
• Value-add projects. The property doesn't qualify for bank financing yet — it needs renovation, lease-up, or entitlement work first. The bridge loan carries it to the point where it does.
• Construction and land development. Funding stages of a build where conventional construction financing is slow or unavailable.
• Unlocking trapped equity. An investor owns property free and clear and wants capital for the next opportunity without selling.

What it costs, honestly

Bridge money costs more than bank money — that's the trade for speed and flexibility. Interest rates charged to borrowers typically run 10–13% APR, plus origination points, with interest-only monthly payments and the principal due at maturity. Historically, our borrower interest rates have generally averaged approximately 11.6%, although rates vary based on market conditions and individual transactions. There is no prepayment penalty, allowing borrowers to repay the loan when their exit strategy is completed.

Borrowers often determine that the additional financing cost is justified when compared with the value of completing the transaction or project.

How the loans are structured — for both sides

• Conservative leverage. We typically lend up to 65% of current value — not optimistic after-repair value, which provides additional collateral coverage relative to the loan amount.
• Recorded security. Loans close through a title company, with lender's title insurance and a recorded deed of trust.
• Defined exit. We underwrite the way out — sale, refinance, or completion — before we fund the way in.

The process, start to finish

1. Tell us about the deal — property, purchase price or value, loan amount, and your exit plan. A brief conversation is often enough for an initial assessment.
2. Terms. You receive a term sheet: rate, points, term length, LTV, extension options.
3. Diligence. Valuation (appraisal or broker price opinion), title work, entity documents.
4. Close. Through a title company, with timing dependent upon due diligence, title, and closing requirements.
5. During the loan. Interest-only monthly payments; for staged loans, draws are released as work completes.
6. Payoff. Your exit event pays the loan off; the deed of trust is reconveyed. Many of our borrowers return for future projects.

Questions worth asking any bridge lender

• Do you fund loans directly, or broker them to another lender?
• What happens if I need more time — what do extensions cost?
• What are all the fees — origination, underwriting, draw fees, exit fees?
• How long have you been lending, and through how many market cycles?

Miller Bates has been answering those questions the same way for 21+ years and over $500M funded: we fund our loans directly rather than brokering them to another lender, extensions are priced in the term sheet up front, and the fee list you see is the fee list you pay.