Paying for time
A bridge loan earns its rate when timing is the constraint, not price. An auction purchase, a seller who needs to close in two weeks, an estate sale priced under market because the heirs want out: none of those wait for conventional underwriting. The same logic applies to a homeowner buying before selling, where bridge money funds a non-contingent offer that sellers actually take. If nothing about the deal is time sensitive, the premium buys you nothing and cheaper money exists.
The useful discipline is naming the deadline. Write down what has to close by when and what the deal loses if it slips. A borrower who cannot fill in those two blanks is paying double-digit interest for convenience.
Carry cost on an eight month flip
Say you bridge a flip with a $400,000 loan at 10.5 percent and 2 points, planning to renovate and resell inside eight months. Monthly interest is $400,000 times 0.105 divided by 12, which is $3,500. Eight months of carry comes to $28,000. Points add $8,000 at closing, and third party costs (appraisal, legal, title) add roughly $3,000 more. All in, the money costs about $39,000, close to 10 percent of the balance for two thirds of a year.
That number goes straight into the flip math. If the projected resale spread is $90,000 before financing, the bridge takes $39,000 of it and the rehab, selling costs, and your profit split what remains. Run the carry at your worst-case timeline too. The same loan held 12 months costs $53,000, and a $14,000 swing is the difference between a decent flip and a mediocre one.
The exit carries the file
Underwriters spend more time on the exit than on anything else, because repayment depends on it entirely. A bridge against a pending home sale rides on the local market: low inventory supports a 3 to 6 month timeline, a slower market calls for 6 to 12 months and a fatter carry budget. An investment deal usually exits through a refinance into permanent financing, often a DSCR loan, once the property has a signed lease and a few months of rent history. Whatever the plan, build in slack. On a 12 month bridge, the refinance application should be moving by month 8 so underwriting has room to close before the balloon. Lenders also discount optimistic exits: a payoff that depends on selling at a record price for the neighborhood gets a lower advance or a pass.
When the exit slips
Extensions run 0.5 to 1 point plus continued interest, and they are granted, not owed. On a $400,000 balance that means $2,000 to $4,000 in fees plus $3,500 a month for as long as the extension runs. One extension is a nuisance. Two extensions on a tight flip usually means the profit is gone and you are working to pay the lender.
The mitigation is boring: list the property before the rehab fully wraps, price it to the comps rather than to your budget, and keep a refinance file warm as a fallback even when the plan is to sell. Bridge lenders have seen every version of the stalled exit, and the borrowers they fund a second time are the ones who moved early.