The two caps that size every bridge loan
Bridge lenders size loans with two ceilings, and you get the lower of the two:
- Loan-to-cost (LTC): a percentage of purchase price + rehab budget. Caps step with experience — roughly 75% for a first project, 80–82.5% with a few exits, 85% for operators with 4+.
- ARV ceiling: usually 70% of after-repair value, regardless of cost.
Example: $410,000 purchase + $95,000 rehab = $505,000 all-in. An experienced operator at 85% LTC pencils to $429,250. The ARV check: $685,000 × 70% = $479,500. The LTC number is lower, so the loan is $429,250 and you bring the difference plus closing costs.
Experience tiers are real money
Verified completed projects move both leverage and rate. A first-timer might see 75% LTC and a ~0.75% rate premium; an operator with four-plus exits gets 85% LTC at the sharpest pricing. Lenders verify via county records and HUDs, so keep documentation from every exit.
Rehab draws
The rehab budget is not wired at closing. It sits in escrow and releases in draws against completed work: you finish a line item, the lender's inspector verifies, funds release (typically 24–72 hours). Expect a line-item scope of work and contractor bid up front — the draw schedule is built from it. First draw usually lands around day 10–14.
Carry math: interest-only, but on your timeline
Bridge loans are interest-only, commonly 12 months (18 for bigger projects). On $429,250 at ~9.3%, carry is roughly $3,330/month. Six months of carry, two of listing, one of escrow = nine months × carry + points + closing costs coming off your gross. A deal that looks like $180,000 gross on paper is meaningfully thinner after real carry — pressure-test the ARV with independent comps before you sign a term sheet, because every dollar of ARV optimism flows straight out of your profit.
Exit strategy: sell or hold
- Sell: the classic flip — the loan retires from sale proceeds.
- Bridge-to-DSCR: refinance into a rental loan at completion and hold. Some lenders build the takeout in, underwriting both legs on day one. If your market softens mid-project, the hold option is your safety valve — know your DSCR coverage at market rent before you buy.
Price your fix & flip scenario in minutes
Enter purchase, rehab, and ARV — the LTC caps, margin, and monthly carry compute live at your experience tier. No documents, no login — live indicative pricing as you answer, then a licensed loan officer reviews your exact scenario.
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