Understanding Fees Associated with Commercial Bridge Loans

Commercial bridge loans are short-term financing solutions used to cover gaps in funding for various real estate transactions. These loans come with several fees that borrowers need to consider. Here’s a detailed look at the common fees associated with commercial bridge loans:

#### 1. **Origination Fee**

- **Definition**: A fee charged by the lender for processing the loan application and setting up the loan.
- **Typical Range**: 1% to 3% of the total loan amount.
- **Example**: For a $1,000,000 bridge loan, the origination fee could range from $10,000 to $30,000.

#### 2. **Interest Rates**

- **Definition**: The cost of borrowing, expressed as an annual percentage of the loan amount.
- **Characteristics**:
  - Typically higher than traditional loans because of the short-term nature and higher risk.
  - Can be fixed or variable.
- **Typical Range**: 6% to 12% annually, but can be higher depending on the lender and borrower’s credit profile.

#### 3. **Exit Fee**

- **Definition**: A fee charged when the loan is repaid, either at maturity or through refinancing.
- **Typical Range**: 0.5% to 2% of the loan amount.
- **Example**: For a $1,000,000 bridge loan, the exit fee could range from $5,000 to $20,000.

#### 4. **Extension Fee**

- **Definition**: A fee charged if the borrower needs to extend the loan term beyond the original maturity date.
- **Typical Range**: 0.5% to 1% of the loan amount for each extension.
- **Example**: For a $1,000,000 bridge loan, an extension fee might be $5,000 to $10,000.

#### 5. **Appraisal Fee**

- **Definition**: The cost of having the property professionally appraised to determine its market value.
- **Typical Cost**: $2,000 to $5,000, depending on the property type and location.

#### 6. **Legal Fees**

- **Definition**: Fees for legal services related to drafting and reviewing loan documents, conducting title searches, and other legal requirements.
- **Typical Cost**: $2,000 to $10,000, depending on the complexity of the loan and property.

#### 7. **Broker Fees**

- **Definition**: Fees paid to a broker for arranging the loan between the borrower and the lender.
- **Typical Range**: 1% to 2% of the loan amount.
- **Example**: For a $1,000,000 bridge loan, broker fees could range from $10,000 to $20,000.

#### 8. **Title Insurance**

- **Definition**: Insurance to protect the lender against any title disputes or claims against the property.
- **Typical Cost**: $1,000 to $3,000, depending on the property value and location.

#### 9. **Survey Fees**

- **Definition**: The cost of conducting a property survey to confirm boundaries and identify any encroachments.
- **Typical Cost**: $500 to $2,000, depending on the property size and complexity.

#### 10. **Environmental Assessment Fees**

- **Definition**: Fees for conducting environmental assessments to identify potential contamination or environmental issues with the property.
- **Typical Cost**: $2,000 to $5,000, depending on the property and required assessment level.

#### 11. **Administrative Fees**

- **Definition**: Miscellaneous fees charged by the lender for administrative tasks associated with managing the loan.
- **Typical Cost**: $500 to $2,000.

### Conclusion

When considering a commercial bridge loan, it’s essential to understand and budget for the various fees involved. These fees can add up, significantly impacting the overall cost of the loan. Borrowers should carefully review all fee structures and terms with their lender and consider working with experienced professionals, like those at Atlantic Commercial Lending, to navigate the process and ensure they secure the most favorable terms.