Understanding 90 LTV Bridge Loans

Last updated: February 13, 2025

90 LTV Bridge Loans: A High-Leverage Solution for Real Estate Investors

When it comes to real estate investing, timing is everything. Whether you’re looking to capitalize on a new opportunity or quickly unlock equity in an existing asset, having the right financing at your disposal can make all the difference. One financing tool that has gained popularity among seasoned and novice investors alike is the 90 LTV bridge loan. In this in-depth article, we’ll break down what 90 LTV bridge loans are, how they work, their pros and cons, and how to determine if this financing strategy aligns with your real estate investing goals.

What Is a Bridge Loan?

A bridge loan is a short-term loan used to “bridge” a gap in financing between two different events or transactions. In real estate, bridge loans often help investors:

1. Purchase a new property before selling an existing property.
2. Access equity quickly for renovations, improvements, or other investments.
3. Take advantage of time-sensitive deals (like off-market opportunities or distressed properties).

Unlike traditional mortgages or conventional bank loans, bridge loans typically involve less documentation, quicker closing times, and higher interest rates. Because of these features, bridge loans are often favored by real estate investors who understand that speed can outweigh cost if it means acquiring a high-potential property before someone else does.

Understanding LTV (Loan-to-Value)

Loan-to-Value (LTV) is a core concept in real estate financing. It measures the relationship between the loan amount and the property’s value (or purchase price, whichever is lower in many cases). Specifically:

LTV = Loan Amount / Value Basis

Where Value Basis is the lower of the purchase price or As Is value.

For example, if a property is valued at $500,000 and a lender offers $450,000 in financing, the LTV is 90% ($450,000 / $500,000).

• Higher LTV means the lender is taking on more risk because they are financing a larger portion of the property’s value.
• Lower LTV means the borrower has a larger equity stake (down payment or existing equity) in the deal, which lowers the lender’s risk.

What Makes a 90 LTV Bridge Loan Unique?

A 90 LTV bridge loan stands out for its high leverage—financing up to 90% of a property’s value. This higher LTV allows investors to put less money down or to refinance a more significant portion of their equity. In other words, you only need to come up with 10% of the property’s value from your own pocket or other financing sources.

Key Characteristics

1. Short-Term Nature
   Bridge loans commonly range from 6 to 24 months. This temporary financing window is designed to be long enough to execute a business plan—like repairing and upgrading a property—yet short enough to transition into permanent financing or sell the property.
2. Faster Approvals
   Hard money or private money lenders that offer bridge loans can often approve and fund deals in a matter of days to a few weeks, a crucial advantage when competing for properties in hot markets.
3. Asset-Based Underwriting
   Since a bridge loan is usually backed by the property itself, lenders focus more on the collateral’s value and the borrower’s exit strategy than on the borrower’s credit scores and financial statements. However, lenders still evaluate financials and experience, especially when offering 90 LTV.
4. Higher Interest Rates and Fees
   Because of the higher risk and shorter term, bridge loans often carry higher interest rates and origination fees. Borrowers must factor these costs into their investment strategy to ensure the deal remains profitable.

When to Consider a 90 LTV Bridge Loan

Not every real estate deal warrants a 90 LTV bridge loan, but it can be a valuable tool in situations where maximizing leverage and speed can outweigh the additional costs. Here are some common scenarios:

1. Fix-and-Flip Projects
   If you’re planning to buy a distressed property and renovate it for a profit, a 90 LTV bridge loan can provide the bulk of acquisition and sometimes even a portion of the rehab budget. This allows you to conserve cash for construction costs or unexpected contingencies.
2. Equity Unlock
   You may already own a property with significant equity, but you need the cash for a new investment. A bridge loan can unlock that equity quickly, giving you the liquidity to act fast on time-sensitive deals.
3. Buying Before Selling
   Homeowners or investors who need to purchase a new property before selling their current one can use a bridge loan to finance the new purchase. Once the old property sells, the proceeds can be used to pay off or refinance the bridge loan.
4. Distressed or Time-Sensitive Acquisitions
   When a lender or seller sets a tight closing window, a 90 LTV bridge loan can help you move quickly. After stabilizing or improving the property, you can refinance into a more traditional (and typically lower interest) long-term loan.

Pros of 90 LTV Bridge Loans

1. High Leverage
   The obvious benefit is that you only need to come up with 10% of the property’s value. This can be a game-changer for investors who have strong deal flow but limited capital on hand.
2. Speed of Funding
   Many deals fall through because the buyer cannot secure financing in time. Bridge loan lenders understand the urgency of real estate deals and typically close much faster than traditional lenders.
3. Flexible Underwriting
   With asset-based lending, your credit score and financial statements are important but secondary. The property’s current and projected value (after rehab or stabilization) holds more weight in the underwriting decision.
4. Opportunity to Diversify Capital
   By minimizing the equity you invest in a single property, you can retain more capital to pursue multiple deals simultaneously, accelerating the growth of your real estate portfolio.

Cons of 90 LTV Bridge Loans

1. Higher Interest Rates
   More risk for the lender translates into higher interest rates for you. This cost must be carefully accounted for in your business plan.
2. Additional Fees
   Origination fees, exit fees, and other charges can add up. These costs can reduce profit margins if not properly budgeted.
3. Short Repayment Period
   If your exit strategy (e.g., selling or refinancing) is delayed, you may need to extend the loan or secure another financing option—often at an additional cost.
4. More Stringent Conditions
   While the underwriting focus is more on the property, lenders offering 90 LTV often require a well-defined exit strategy, reserves, and a solid track record from the borrower (especially for extensive rehab projects).

Underwriting Factors for 90 LTV Bridge Loans

Getting approved for a 90 LTV bridge loan involves meeting certain criteria that reassure lenders of both the borrower’s capability and the project’s profitability. Some of these factors include:

1. Property Value and Condition
   Lenders typically require an appraisal or valuation to confirm the property’s current and potential value (ARV, or after-repair value). They also evaluate the property’s condition—whether it’s a cosmetic fixer or requires major structural work.
2. Exit Strategy
   A clearly defined plan for how you’ll repay the bridge loan is critical. This could be selling the property post-renovation or refinancing into a long-term mortgage once the property is stabilized.
3. Borrower Experience
   Lenders often look favorably on borrowers with a successful track record of real estate projects—especially fix-and-flip or buy-and-hold investments. Demonstrated experience can sometimes improve loan terms.
4. Down Payment and Reserves
   Even though the LTV is high, lenders may still require that you show sufficient cash reserves to cover holding costs, interest payments, and potential overruns on rehab.
5. Creditworthiness
   While bridge loan underwriting can be more flexible, having decent credit can help you secure more favorable terms (such as lower interest rates or fees).

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Crafting a Profitable Investment Strategy

To maximize the benefits of a 90 LTV bridge loan, investors should carefully plan out each phase of their deal.

1. Property Assessment
   Conduct a thorough due diligence: location analysis, comparable sales (comps), estimated rehab costs, and after-repair value projections.
2. Financial Analysis
   Plug in the bridge loan’s interest rate, fees, and closing costs into a financial model. The numbers must confirm that there is sufficient profit margin (or long-term value if you plan to hold the property).
3. Project Timeline
   Bridge loans are short-term, so map out renovation schedules, contractor timelines, and listing or refinance timelines. Delays can be costly when you have a higher-interest loan on the books.
4. Exit Strategy Planning
   Make sure you have a realistic plan for how you’ll sell the property or refinance into a longer-term loan once the value is stabilized. If you plan to hold the property, line up a reliable lender in advance for the take-out financing.

Common Misconceptions About 90 LTV Bridge Loans

1. “Only for Distressed Investors”
   High-leverage bridge loans are not solely for investors in financial trouble. They are used by savvy investors who value speed and high leverage to capitalize on lucrative opportunities.
2. “Too Expensive to Be Worth It”
   While these loans do come with higher costs, they can be worth it if the property’s upside potential is significant or if timing advantages allow you to beat out competing buyers.
3. “Hard to Qualify For”
   Qualifying can be easier from an underwriting perspective (as property value and project potential weigh heavily). However, you still need a strong project plan and, for some lenders, a solid track record.

Is a 90 LTV Bridge Loan Right for You?

A 90 LTV bridge loan can be an excellent tool for real estate investors who:

• Have a clear and profitable plan for the property.
• Need to move quickly in a competitive market.
• Want to leverage their capital to acquire or improve multiple properties simultaneously.
• Are comfortable with short-term, higher-interest debt.

However, if you prefer lower-risk strategies, can’t handle the higher monthly interest payments, or lack a solid exit strategy, a lower-LTV option or a different form of financing (like a conventional loan or a lower LTV hard money loan) might be more appropriate.

Final Thoughts

A 90 LTV bridge loan is a powerful tool in the world of real estate investing—offering higher leverage, quicker access to funds, and flexible underwriting. By effectively utilizing this type of financing, investors can secure properties, accelerate property improvements, and position themselves for higher returns. However, this benefit comes at a cost: higher interest rates, fees, and the need for a crystal-clear exit strategy to ensure profitability.

If you’re prepared, have a well-researched plan, and are comfortable navigating short-term debt, a 90 LTV bridge loan could be the key to unlocking your next high-potential real estate deal. As always, be sure to conduct thorough due diligence and consult with experienced professionals—lenders, attorneys, real estate agents, and contractors—to ensure you’re making an informed and strategic choice for your investment portfolio.

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Bridge Loans from OfferMarket

OfferMarket is a leading private lender for rental property investors and we specialize in 1-4 unit residential properties. If you need a bridge loan, reach out to our team and we will be happy to review your deal scenario.

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