Bridge Loan vs. Permanent Financing: How Would You Approach This Situation?

[Terry Garrett]

I’m looking for input from investors and lenders who have navigated a situation like this. I own an investment property in St. Louis that recently appraised at approximately $363,000, with a current loan payoff of approximately $194,000. The property has significant equity, but during a contractor dispute that resulted in litigation, the loan matured and subsequently fell into default. I obtained a judgment in my favor, but the contractor has filed a motion to set aside that judgment, and we’re currently awaiting the court’s ruling. Because of the pending litigation, title concerns, and the loan’s current default status, obtaining permanent financing has become more challenging. I’m currently evaluating two different financing approaches: Option 1 – Bridge Loan * Refinance the matured loan immediately. * Prevent foreclosure. * Preserve the investment. * Resolve the litigation without the immediate pressure of foreclosure. * Refinance into long-term financing once the litigation and title issues are resolved. Option 2 – Long-Term Financing * Better long-term structure. * Requires full underwriting, an appraisal, entity documentation, and additional due diligence before final approval. * Given the time-sensitive nature of my situation, I’m concerned about investing several weeks in underwriting only to be declined near the end of the process. For those who have experience with situations like this: * If you were in my position, which option would you prioritize and why? * Have you successfully refinanced from a bridge loan into permanent financing after resolving legal or title-related issues? * What factors have lenders focused on most when evaluating situations like this? * If you were underwriting this loan, what would concern you the most, and what would give you confidence to move forward? I’m interested in learning from others who have worked through similar situations and appreciate any insights or lessons learned from either the borrower or lender perspective.

[Eduardo Cavasotti]

I would treat this as triage, not rate shopping.

The first decision is whether the property has a clean path to a first position lender before the foreclosure clock matters.

I would build one packet with the current title commitment, payoff, judgment, pending motion timeline, rent roll, insurance, and DSCR math, then let that packet decide whether permanent financing is realistic or the bridge is buying time.