· Education · Sayasone Phongvichith
Planning your exit: interest only, balloon at maturity
Our loans are interest only with a balloon at maturity. Here is what that means, and why your exit plan matters before you close.
A bridge loan is built around a destination. Knowing where you are headed matters as much as the day you close.
How the loan works
At RED, loans are interest only with a balloon at maturity. Your payments cover interest, and the principal balance comes due at the end of the term. Renovation draws are released against completed work.
On Fix & Flip and Stabilized Bridge, the term is 12 months.
The two common exits
- Sell. The sale proceeds pay off the loan. Your plan depends on your expected value and on how long a sale takes, which is why a realistic timeline matters.
- Refinance. A longer-term loan takes out the bridge. For a rental, that could be a program like our Rental Loan (DSCR), a 30-year loan with a 1.05x minimum DSCR. Stabilized Bridge lists a 1.10x DSCR exit option.
Questions to answer before you close
- If I sell, what price do I need, and how long can the sale take?
- If I refinance, will the property meet the DSCR a long-term loan needs?
- What happens if the work or the sale takes longer than planned?
A plan that survives a delay is more persuasive than one that does not.
Tell the desk your plan
Include your exit with your scenario. It helps the desk see the whole deal, not just the day of closing.
Program figures are indicative only and subject to complete documentation, underwriting, appraisal and final credit approval. This post is general information, not financial or legal advice.