Meet Cade, Cade is looking to finance a multi-family property but is confused on the different types of loans.
Cade is told by his partner Matt that there are two types of loans: Agency Loans and Bridge Loans.
Matt explains that agency loans are highly regulated longer-term loans backed up by a government agency. Agencies guarantee that the principal amount of the loan will be repaid which allows syndicators to generally receive a lower interest rate with higher amounts of leverage.
Matt explains that in order to receive this loan, the property must be stabilized meaning that it must have had 90% occupancy for the past three months.
Cade asks what a bridge loan would entail, Matt explains that bridge loans are short-term loans and would hold a higher interest rate generally for bridge loans syndicators will receive a faster application approval and funding timeline than he would for agency loans. Bridge loans would also not require the asset to be stabilized.
Matt describes that overall bridge loans are riskier than agency loans due to the fact that bridge loans are short-term and before the end of the loan term this indicator must refinance or sell the property.
Cade now understands the differences between bridge and agency loans and is more equipped to make financing decisions on his multifamily property