What's Happening in the Loan Market?
Bridge Loan Activity is Growing
Bridge loans—short-term loans lasting less than 36 months—are becoming more popular. From January to August 2024, bridge loan activity jumped by 30% compared to the same period in 2023. This means more investors are using short-term loans to fund their projects, signaling strong growth in the market.
Interest Rates on Bridge Loans Are Slightly Lower
Good news for borrowers! The average interest rate for bridge loans dropped from 11.53% in January 2024 to 11.12% in August 2024. Most bridge loans have interest rates between 10% and 12.99%. Loan amounts have stayed steady, typically ranging from $550,000 to $650,000.
Where Are Most Loans Happening?
California, Florida, and Texas continue to lead in bridge loan activity. In California, Los Angeles and San Diego counties top the list, with Orange County also ranking high. Texas has Dallas County in the top 10, but California dominates the market.
Local Interest Rates Can Vary
Interest rates can vary a lot depending on where you're borrowing. Even though many believe California has lower rates, the data shows that California often has higher rates and larger loan amounts due to high property values. This gives lenders more opportunities to fund bigger deals.
DSCR Loans Are Also Growing Fast
Debt Service Coverage Ratio (DSCR) loans—longer-term loans usually lasting 30 years—are also on the rise. From January to August 2024, DSCR loan volume increased by 34% compared to 2023. Interest rates for DSCR loans dropped from 8.30% in January to 7.38% in August 2024. Loan amounts typically range between $250,000 and $290,000.
DSCR Loan Activity by State
Pennsylvania leads the nation in DSCR loan activity, with Florida and Ohio following. States like California, Georgia, and New York have also joined the top 10 in 2024, showing how changing interest rates can shift where investments make the most sense.
What This Means for You
The Federal Reserve is expected to lower interest rates, and the market is already reacting. A major factor in this shift is the drop in the 10-year Treasury rate, which serves as a benchmark for many types of financing. This decrease has already started to lower DSCR loan rates, leading to a surge in DSCR loan production and more refinancing opportunities. For bridge loans, staying aware of local market conditions is key. Charging too little could mean missing out on profits, while charging too much could price you out of the market.
Overall, it's a great time to explore loan options, whether you're looking for short-term bridge loans or long-term DSCR loans!
How Jet Lending Can Help You
At Jet Lending, we specialize in helping real estate investors secure the right financing solutions to maximize their success. Whether you're interested in bridge loans to fund your next fix-and-flip project or a DSCR loan to build your long-term rental portfolio, our team offers competitive rates and personalized service. We understand the market and can help you navigate changing interest rates and local market trends. Plus, with $0 out-of-pocket solutions at closing, we make it easier for you to start and grow your investment projects.
Reach out to Jet Lending today to find out how we can support your investment goals and help you capitalize on market opportunities!
Read the full article here https://aaplonline.com/articles/market-trends/state-of-the-industry-bridge-loan-dscr-tradeoffs/#
