Bridge Loan VS Gap Loan: What You Didn’t Know

Although both of these loan types  fall in the same category of hard money loans, these are two different types of loans.

When referring to bridge loans, the term “bridge” describes this type of loan because this type of loan serves to “bridge” the borrower to another future outcome.

  • A bridge loan is a loan in a senior, or first lien position, and serves as the primary financing vehicle for the borrower.
    In contrast, a gap loan serves as a secondary financing vehicle for a borrower, and is a loan in a junior lien position.
  • A gap loan can be subordinate to a bridge loan in a first position.
  • Similar to mezzanine debt, a gap loan is so-called because it “gaps” the difference between the borrower’s primary loan and the borrower’s available cash on hand.

Let me explain further using the 3 examples below.

Example 1: A bridge loan is used to buy an investment property fast.

Once the investor acquires the property, they would then get  a traditional bank loan to replace the bridge loan.

In this example, the bridge loan served to “bridge” the borrower from the acquisition to another form of financing.

Example 2: A real estate investor already owns an income-producing property.

The bank loan on the property is coming due, and the borrower seeks to refinance the loan with another bank loan or hard money lender.

But, the borrower’s credit score is hit hard due to a recent divorce, and no bank will refinance the loan because of the borrower’s low credit score.

The borrower is able to get a bridge loan in place for a term of 12 months while in credit repair. Once the credit score gets above 700, the borrower is able to qualify for a bank loan and pays off the bridge loan.

Example 3: A real estate investor purchases an income-producing property.  This property is currently vacant and in need of significant repairs.

Such a property would not qualify for traditional bank financing. The investor obtains the bulk of the financing in the form of a bridge loan to purchase the property.

Because significant repairs are required, the investor is short on cash to repair the property.

The investor obtains a gap loan, in a second lien position behind the bridge loan, and uses the funds from the gap loan to repair the property.

Once the necessary repairs are completed, the borrower then leases out the property. The borrower then sells the property to another real estate investor who wants to hold it for the long term.

In this example, the borrower used the bridge loan as the primary financing vehicle to purchase the property.  The borrower also used the funds from the gap loan to make the repairs to the property. The bridge loan and the gap loan are both paid off upon sale of the property.


Both bridge loans and gap loans have their unique place in real estate financing. Although both of these types of loans are categorized as hard money loans, they serve very different purposes.

8 thoughts on “Bridge Loan VS Gap Loan: What You Didn’t Know

  1. Hi Corey, First of all, I must commend you on your great content and website! I am looking for gap funding of about 500k for a buy and hold in Utah. The purchase is 2.5M and will be worth 4M after improvements. Please contact me@ 7028139484 Tonia McCandless

  2. Thank you for the content. It was very helpful.

    Would you be willing to do a gap and bridge loan on a real estate deal? If so, what is your criteria?

  3. Client has a 446 unit apartment complex
    Approximately 85 % of the apartment units have been finished and delivered to the leasing staff. The occupancy rate is approximately 70 % with another 248 rental applications being processed that are on the waiting list. The property is essentially 120 % pre-leased. Stabilization should occur in November 2021.

    Client has an offer for 34,000,000 against a loan first lien of 19 million. He must finish up property. He needs 3 million approximately to finish interiors to lease up. Is this a loan you would consider.

  4. Hello Corey,
    You video was very helpful in clearing up the difference between a Bridge and Gap loan. Thank you. Do you loan outside of Utah ? I’m investing in California.

    1. Yes we lend in most western states. We will reach out to you, or reach us direct at: 435-565-1768. Email: info “at”

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Corey Curwick Dutton, MBA Park City, Utah

About the author

Corey Curwick Dutton, MBA Park City, Utah - 2005 MBA Graduate with 10 years experience in Business Management including International Management. Corey is a Private Money Lender and Loan Officer. In her spare time Corey enjoys writing on topics in the private money lending industry. She also enjoys hobbies such as mountain biking and skiing in the great outdoors of Utah.