What is an Interim Loan in Real Estate?
What is an Interim Loan?
IN real estate, an interim loan is a short-term financing solution used to bridge the gap between two longer-term loans or to provide temporary funding for a specific purpose. It is often used in construction, development, or property acquisitions when permanent financing is not yet available.
Key Features of Interim Loans
- Short-Term: Typically lasts between a few months to a few years.
- Higher Interest Rates: Due to the short duration and higher risk, interest rates are generally higher than long-term loans.
- Secured by Property: Often backed by real estate assets.
- Repaid with Permanent Financing: Borrowers usually repay the interim loan with proceeds from a long-term loan or other financing source.
Common Uses
- Construction Loans: Developers use interim loans to fund construction projects. Once completed, they replace the loan with permanent financing or sell the property.
- Bridge Loans: Homebuyers use them to purchase a new home before selling their current one.
- Acquisition Loans: Investors use them to acquire properties quickly before securing long-term financing.
