Construction Bridge Loans: Terms, Costs and How to Qualify

A construction bridge loan is short-term, interest-only debt that funds land acquisition, pre-development work or a build until the project is sold or refinanced into permanent financing. Regulators describe the category as acquisition, development, and construction (ADC) lending, and bridge structures sit inside it. This guide explains how the loans are structured, what they cost, how draws work, and how an investor or builder decides between a bridge and a conventional construction loan.

TL;DR

• Construction bridge loans are short-term (often 6 months to 3 years), interest-only facilities that carry a project from one milestone to the next, such as acquisition, permitting, vertical construction, sale or refinance.
• Underwriting centers on the asset and the exit: the property's value or cost, the budget, the draw schedule and the take-out plan matter more than a borrower's FICO score.
• Jaken Finance Group publishes a rate range of 8.99-13.5% on its bridge and new construction loans, with leverage up to 100% LTC, deferred payment options and no minimum credit score.
• The draw schedule and the exit strategy are the two documents that most often decide whether a build finishes on time.

Table of Contents

• What a construction bridge loan does
• Typical terms at a glance
• How interest-only costs work in practice
• Leverage: LTC, LTV and ARV
• The draw schedule decides the project
• Exit strategy: the part lenders underwrite hardest
• Construction bridge loan or construction loan?
• What lenders look at when you apply
• A sample structure
• Our perspective
• Financing a build with Jaken Finance Group
• Mistakes that raise the cost of a bridge
• FAQ
• Sources

What a construction bridge loan does

A bridge loan covers a gap in time. In construction, that gap usually falls in one of four places:

1. Acquisition to permits. A buyer closes on land or a shell quickly, before entitlements or plans are final.
2. Permits to completion. Capital is released in stages while the structure is built or rehabbed.
3. Completion to stabilization. A finished building needs time to lease up or to be listed before a long-term lender will take it out.
4. Stalled projects. A build that lost its original financing needs new money to finish.

The OCC's Comptroller's Handbook groups acquisition, development and construction lending together as a distinct risk category from financing for income-producing property that is already built. That distinction explains why construction bridge debt is underwritten differently from a standard mortgage: repayment depends on a future event (a sale or a refinance), not on cash flow that already exists.

Federal credit union rules give a useful working definition as well. NCUA regulation 723.6 defines a construction and development loan as financing that lets a borrower acquire property with the intent to construct or renovate on it. A bridge used for those purposes fits that same logic.

Typical terms at a glance

Terms vary by lender, asset type and sponsor experience. The table below shows the structure most private and asset-based lenders use, along with the figures Jaken Finance Group publishes.

The 8.99-13.5% range is the rate published on the Jaken site for bridge and new construction loans. Where a loan lands inside it depends on the deal, so treat it as a range, not a quote.

How interest-only costs work in practice

Readers often ask what a given loan costs per month. On an interest-only bridge, the arithmetic is simple: monthly interest equals the amount drawn, times the annual rate, divided by 12.

A worked example at the low and high ends of the published range, on a $100,000 balance:

• At 8.99%: $100,000 × 0.0899 ÷ 12 = $749.17 per month
• At 13.5%: $100,000 × 0.135 ÷ 12 = $1,125.00 per month

For a $350,000 balance, the same math gives $2,622.08 per month at 8.99% and $3,937.50 per month at 13.5%.

Two cautions apply. First, these figures exclude origination points, third-party reports, inspection fees and closing costs, which add to the total cost of capital. Second, on a construction facility interest accrues only on the funds drawn. A $350,000 commitment that has released $120,000 so far is charged on $120,000, so carrying cost rises as the build progresses. A realistic budget models interest month by month against the draw schedule, not on the full commitment from day one.

Floating versus fixed pricing

Bank-style bridge facilities are commonly priced as SOFR plus a spread, which means the payment moves with the benchmark. Private lenders more often quote a fixed rate. For a short hold, fixed pricing makes the carry predictable, and that predictability matters when a project has a narrow margin between cost and exit value.

Leverage: LTC, LTV and ARV

Construction lenders measure leverage against more than one number:

• LTC (loan-to-cost): the loan as a share of total project cost, including acquisition and the rehab or construction budget.
• LTV (loan-to-value): the loan as a share of the property's current appraised value.
• ARV (after-repair value): the projected value once work is complete. Lenders typically cap total leverage against ARV as a second test.

A lender that advances a high LTC still checks that the final loan balance stays within a sensible percentage of ARV. If the numbers do not fit, the loan is sized down to the tighter limit. Jaken's published positioning is leverage up to 100% LTC, which suits investors who want to preserve cash for the next acquisition. The practical effect is that the investor puts in less equity, and the lender's protection comes from the property, the budget and the exit.

The draw schedule decides the project

Unlike a standard mortgage, a construction bridge is milestone-based. Capital is not released in one payment. It is released in draws, usually after an inspection confirms the work completed. According to the OCC handbook's framework for construction lending, controls over disbursement and inspection are central to managing the risk of these loans.

A workable draw schedule does three things:

1. Matches contractor payment terms. If the contractor expects a deposit and the loan releases funds only after work is verified, the borrower must cover the difference. A mismatch is a common cause of stalled sites.
2. Sets clear milestones. Foundation, framing, rough-in, drywall and finish are typical stages. Each should have a defined percentage of the budget.
3. Allows for lead time. Inspection and wire timing add days between a request and funding. Build that lag into the schedule.

Before signing, ask the lender how long a draw takes from request to wire, who performs inspections, and what happens if a milestone is only partly complete. A fast closing helps little if each draw then takes two weeks.

Exit strategy: the part lenders underwrite hardest

Because the loan is a bridge, the lender's real question is how it gets repaid. Common exits are:

• Sale of the finished property, which is the usual path for fix-and-flip and spec builds.
• Refinance into a long-term loan, such as a DSCR rental loan for a build-to-rent project.
• Bridge-to-permanent conversion, where the construction financing rolls into term debt. Some lenders see this as a way to simplify documentation and reduce the risk of refinancing in an unfavorable rate environment.

Market conditions make this a live concern. A Richmond Fed analyst interviewed in a Federal Reserve Bank transcript described a wave of commercial real estate loans with balloon payments coming due, which raises demand for bridge capital while pushing lenders to look harder at repayment plans. A March 2026 analysis from USA Construction Consultants similarly describes a refinancing wall, with many developers facing refinancing of construction and bridge debt at higher rates than they originally planned.

The lesson for a borrower is to underwrite the exit before the entry. Model a sale at a price 5% to 10% below your projection, and a refinance at a rate higher than today's. If the project still clears, the structure is sound. If it works only on the best case, the loan term and leverage need to change.

Construction bridge loan or construction loan?

The two products overlap, and the right one depends on where the project stands.

At Jaken Finance Group, the line between the two is less sharp than at a bank, because the same asset-based underwriting applies. For a deeper comparison, see our guide on construction loans versus bridge loans. Investors weighing a bridge against other private capital can also read bridge loans versus hard money loans.

What lenders look at when you apply

Are bridge loans hard to get? For borrowers with a viable project, usually not, but the file must be complete. Expect to provide:

• The purchase contract or proof of ownership
• A scope of work and line-item budget, plus contractor bids or a licensed contractor agreement
• Plans and permit status, or a timeline to permits
• An appraisal or after-completion valuation
• Evidence of the exit: a sales comparable analysis or a refinance plan
• Entity documents, a schedule of real estate owned and proof of funds for the down payment and closing costs
• Builder's risk and liability insurance

Asset-based lenders weigh these items more heavily than a credit report. That is why a borrower with a lower FICO score and a strong deal can qualify where a bank would decline. Experience still matters: a first-time builder with a thin budget will see tighter leverage than a sponsor with completed projects.

A sample structure

The following is an illustration, not a quote or an offer.

• Land and entitlement-ready lot: $200,000
• Construction budget: $400,000
• Total project cost: $600,000
• Projected ARV: $850,000
• Loan at 85% LTC: $510,000, which is 60% of ARV
• Borrower equity: $90,000

At 11% on a fully drawn $510,000, monthly interest is $4,675. Because draws are staged, the average balance over a 10-month build is lower, so total interest is lower than ten times that figure. A sale at $850,000 repays the balance and leaves margin for selling costs and profit. If the sale slips by three months, the added carry is roughly $14,000 at the full balance, which the budget should already include as a contingency.

Our perspective

We see the same pattern across construction bridge deals: the borrowers who finish on time are not the ones with the lowest rate. They are the ones with a realistic budget, a draw schedule that mirrors their contractor's payment terms and an exit that holds under pressure.

For that reason we underwrite the property and the plan first. Our programs are asset-based, with no minimum credit score, leverage up to 100% LTC, deferred payment options and closings in as few as 7-10 days. Speed has value only when the loan structure supports the project afterward, so we spend time on the budget and the exit before we discuss the rate.

Our advice to any investor: size the loan to the weakest plausible exit, not the best one. A bridge is a tool for controlling timing, and it works best when the timeline has slack built in.

— Jason Taken

Financing a build with Jaken Finance Group

Jaken Finance Group provides bridge loans and new construction loans to real estate investors across the United States, with published rates of 8.99-13.5%. Investors planning ground-up projects can review our new construction loans for investors, and those building small multifamily can look at multifamily construction loans for 5 to 20 units. If a project has stalled mid-build, our mid-construction refinance page explains the options. Need financing for your next project? Start with the program that matches your stage and send us the deal.

Mistakes that raise the cost of a bridge

• Underestimating the timeline. Permits and inspections rarely run to the original schedule. Add 20% to the duration.
• Ignoring soft costs. Interest, insurance, taxes, utilities and inspection fees are costs that appear after the construction budget is set.
• Choosing a term with no extension. If the sale takes longer than planned, an extension option avoids a default or a forced sale.
• Accepting a mismatched draw schedule. Confirm draw timing before closing, not after the first invoice arrives.
• Planning a refinance with no rate cushion. Test the exit at a higher rate than today's.

For related reading on pricing, see our commercial bridge loan rates guide, and for commercial buildings that will move to longer-term debt, see bridge now, SBA later.

FAQ

How do construction bridge loans work?

The lender funds a short-term, interest-only loan against the property and the project plan. Funds for construction are released in draws after inspections, and the borrower repays the balance in full through a sale or a refinance at the end of the term.

How much would a $100,000 construction loan cost per month?

On an interest-only basis, a fully drawn $100,000 balance costs about $749 per month at 8.99% and $1,125 per month at 13.5%. Origination points and fees are extra, and on a construction loan interest is charged only on the amount drawn.

Are bridge loans difficult to get?

They are usually easier to obtain from asset-based lenders than from banks, because approval rests on the property value, the budget and the exit plan. A complete file, with a scope of work, contractor bids and a clear repayment plan, speeds approval.

Can I use a bridge loan to buy land and build?

Yes, in many structures. A bridge can fund the acquisition and early pre-development work, and a new construction loan or a bridge with a construction holdback can fund the build. The loan amount depends on the lot value, the budget and the projected completed value.

Sources

• Commercial Real Estate Lending, Comptroller's Handbook (OCC)
• Commercial Real Estate Lending and Risks in the Fifth District, Speaking of the Economy transcript (FRASER, St. Louis Fed)
• Construction Lending 2026, USA Construction Consultants

Recommended

• How Bridge Loans Work: A 2026 Guide for Homebuyers
• How Much Does a Bridge Loan Cost?
• Construction Loan vs Bridge Loan: Which Fits Your Project?
• Bridge Loan Terms: A Practical Guide for Investors