How much does a bridge loan cost?
A bridge loan typically costs 8 to 12 percent interest, paid interest-only, plus one to two origination points at closing, with a term of 12 to 36 months. On a $500,000 loan held for twelve months, expect total interest and fees of roughly $50,000 to $75,000, depending on the lender, the property, and your credit.
The full cost list
| Cost | Typical range | Notes |
|---|---|---|
| Interest rate | 8 to 12 percent | Interest only, often with an interest reserve |
| Origination points | 1 to 2 | Paid at closing, sometimes financed into the loan |
| Extension fee | 0.25 to 0.5 point per extension | Only if you need more time |
| Exit fee | 0 to 1 point | Charged by some lenders at payoff |
| Appraisal | $600 to $3,000 | Full appraisal on most bridge loans |
| Legal, title, and closing | $1,500 to $5,000 | Varies by state and loan size |
| Minimum interest | 3 to 6 months | You pay this even if you refinance sooner |
A worked example
Say you borrow $500,000 at 10 percent with 1.5 points and hold the loan for twelve months. Interest is $50,000, points are $7,500, and closing costs run about $4,000. Total cost is roughly $61,500, or about 12.3 percent of the loan amount for the year. If you pay it off in month six, interest drops to $25,000, but a six-month minimum interest clause would have made that the floor anyway.
What moves the price
Leverage. A loan at 60 percent of value prices lower than one at 75 percent.
Credit and experience. Bridge lenders review both. A 720 score and two prior projects earn a better rate than a 650 score on a first deal.
The exit. A signed lease, a permanent lender's pre-qualification, or a listing agreement lowers the lender's risk and the rate with it.
Property type and condition. Stabilized property prices lower than heavy value-add. Land and partially built projects price highest.
Speed. Closing in ten days instead of thirty often costs a half point.
Bridge vs hard money on cost
Hard money typically runs 10 to 14 percent with two to four points, so a bridge loan is usually the cheaper short-term loan when you qualify for it. The tradeoff is underwriting: bridge lenders look at the borrower and the exit, hard money lenders look mostly at the property equity.
Reducing the cost
- Bring a documented exit to the application.
- Ask whether points can be reduced in exchange for a slightly higher rate, or the reverse, depending on how long you expect to hold.
- Confirm the minimum interest period before you sign.
- Avoid closing before you can use the money. Interest starts on day one.
How CommFi handles it
Our lending desk prices the bridge loan first and funds direct when it fits. When the deal needs a different box, the desk searches a database of 7,000+ lenders and the ones that fit compete for it. Zero upfront fees, one point of contact.
Related reading
Related questions
- What interest rate do bridge loans charge?
- Typically 8 to 12 percent, paid interest-only. Leverage, credit, experience, and the strength of the exit move the rate within that range.
- How many points does a bridge loan cost?
- One to two points at closing is typical. Some lenders add an exit fee of up to one point at payoff.
- Do I make monthly payments on a bridge loan?
- Usually, yes, interest only. Many lenders set up an interest reserve from the loan proceeds so the payments are made from the loan during the term.
- Is there a penalty for paying off a bridge loan early?
- Often a minimum interest period of three to six months rather than a traditional prepayment penalty. Ask before closing.
- Are bridge loans cheaper than hard money?
- Usually. Bridge loans run 8 to 12 percent with one to two points; hard money runs 10 to 14 percent with two to four points.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.