Bridge to Perm
A financing path that uses a short term bridge loan first, then converts to permanent financing once the property stabilizes.
Bridge to perm describes a two stage financing plan. A short term bridge loan funds the purchase or repositioning of a property that does not yet qualify for permanent debt. Once the property stabilizes, the borrower refinances into a permanent loan with a lower rate and longer term.
The bridge phase carries a higher rate, often 9 to 12%, and is usually interest only to keep payments manageable while income ramps. It gives the sponsor time to lease up, renovate, or fix operations. The permanent phase locks in long term, lower cost debt once cash flow is proven.
Some lenders package both stages in one commitment, while others treat them as separate loans. Either way, the plan lives or dies on hitting the stabilization targets that let the property qualify for the permanent takeout.
Formula
Bridge loan during lease up, then a refinance into permanent debt
Worked Example
An investor buys a property at 60% occupancy on a 12 month bridge loan at 10%, leases it to 92%, then refinances into a 25 year permanent loan at 7% once the property is stabilized.
Why It Matters
Bridge to perm lets you buy and fix a property that no permanent lender would touch yet, then lock in cheap long term debt once it performs. The risk is executing the plan before the bridge loan matures.
Related Terms
Related Programs and Tools
Frequently Asked Questions
When does bridge to perm make sense?
It fits properties that need lease up or renovation before they qualify for permanent debt. The bridge loan buys time, then you refinance once the property stabilizes.
What rate does the bridge phase carry?
Bridge loans often price around 9 to 12% and are usually interest only. The permanent takeout is meaningfully cheaper once cash flow is proven.