No, instead we’re referring to additional capital for an existing construction project to fund its completion.
This is typically provided by a private mortgage lender that specifically funds these types of requests and is secured by a mortgage registration behind the outstanding mortgages and liens already registered against the property.
To better understand when you would require a construction bridge loan, here are the most common scenarios where bridge financing is sought.
The most common situation is where there are cost overruns in a construction project. Certain items cost more than budgeted to complete, unexpected expenses occur that were not planned on but must be dealt with to complete the project, and on.
In many cases, the construction project is over 90% complete and needs a relatively small amount of money, compared to the total project cost, to complete the remaining work. And its also not unusual that these funds are required quickly in order to avoid any construction delays that could add still more costs to the project.
The second scenario where bridge financing is required for a construction project is when there is a change in scope by the builder, developer, or property owner. This is slightly different than a cost overrun as that is basically out of the control of the developer or contractor. A change in scope is a conscious decision by those in charge to change certain features of the build which will be higher in cost that what was initial budgeted. This could include such things as different windows, a larger kitchen, finished basement, etc.
Because the incremental cost related to a change in scope can be isolated, the bridge financing to complete the work can be arranged for the time that particular work is going to take place.
The third most common situation where bridge financing is required in a construction project is when the primary construction lender is either not providing one or more construction draws on a timely basis, or the lender has cut back on the scheduled draw amount causing a shortfall in the cash flow for the overall project.
While private mortgage lenders are the key suppliers for these construction bridge loans, there are typically only a handful of private lenders that will provide this type of financing.
As a result, its important to be working with a construction mortgage broker who is aligned with construction bridge financing sources in order to gain access to the funds required as quickly as possible.
If you have a construction project that can’t be completed without some additional capital being injected into the cash flow right away, I suggest that you give me a call so I can quickly as your requirements and provide construction bridge financing options for your immediate consideration.