Bridge Loan Underwriting: When It Fits, When It Kills You

Bridge debt is the most overused capital structure in commercial real estate. It looks attractive — fast close, high leverage, interest-only — and that is exactly why it kills deals when the take-out doesn't happen on schedule. Bridge loan underwriting is fundamentally different from permanent-loan underwriting because the entire thesis depends on a refinance event 12–36 months out.

A defensible bridge underwriting tests three exits: agency-stabilized take-out, bank-portfolio take-out, and a sale at a stressed cap rate. If two of three pencil at the projected NOI, the bridge works. If only one pencils, you are betting the deal on a single execution path — and that is where bridge borrowers lose properties.

The other half of bridge underwriting is the rate-cap math. Most bridge loans require a rate cap, and the cost of that cap has tripled since 2022. We have seen deals where a 3-year rate cap costs more than the first 12 months of debt service. If your bridge model assumes a 2021-era rate cap cost, the deal is upside-down before you close.

Full guide coming soon. Want a bridge-vs-permanent comparison on a specific deal today? Run a free screening — every Full report tests both structures.