What defines a bridge loan?

A bridge loan is fundamentally characterized as a short-term funding arrangement designed to facilitate the transfer between loans, typically when an individual or business needs immediate cash to cover expenses while awaiting longer-term financing or the sale of an existing property. This type of financing can be particularly useful in real estate transactions where there is a timing gap between the purchase of a new property and the sale of an existing one.

The correct answer reflects this principle, as bridge loans provide the necessary liquidity for borrowers to secure a new property without having to wait for their existing property to sell. These loans usually have higher interest rates compared to long-term loans due to the increased risk and shorter repayment period.

In contrast, long-term financing refers to loans intended for extended periods, generally not suitable for transitional needs like moving from one property to another. Additionally, options regarding financing secured against multiple properties or loans specifically for commercial properties narrow the definition of a bridge loan too much and do not capture its primary function in facilitating transition during property transactions. This distinction is essential for understanding the role of bridge loans in real estate financing.