Bridge Loan Term Sheet Checklist: What to Look For Before You Sign

What is a term sheet, and is it binding?

A term sheet is usually a summary of proposed terms, issued before final loan documents. Whether any part is binding depends on its wording. Many term sheets are expressly non-binding except for specific items like deposits or fees. Read the language carefully, and ask an attorney if you're unsure. The final loan documents (the note, the security instrument and any loan agreement) control.

Axelrad Capital's homepage FAQ says it can give soft terms by phone, and hard terms once it has a loan application, purchase contract, rehab budget, entity info and ID.

What should be on a bridge term sheet?

Borrower and property. Correct entity name, guarantors, property address and property type.

Loan amount and leverage. Total loan, the amount funded at closing, the rehab holdback, LTC (loan-to-cost: the loan divided by purchase price plus renovation budget) and LTV (loan-to-value: the loan divided by property value). Your term sheet shows your numbers. See the Bridge Loans page for current program terms.

Pricing. Interest rate (fixed or variable), whether interest is charged on the full loan or only on drawn funds, points, and every lender fee by name.

Term. Length, maturity date, extension options and extension fees. Your term sheet's number is the one that matters.

Payments. Interest-only or amortizing, first payment date, and any interest reserve.

Draws. How draws are requested, inspected and funded, plus any draw fees. Axelrad's homepage FAQ says "No draw fees."

Prepayment. Any penalty, minimum interest or exit fee. Axelrad says it doesn't charge prepayment penalties on bridge loans.

Conditions. Valuation, title, insurance, entity documents, reserves and anything else that has to happen before closing.

Expiration. How long the term sheet is valid.

Term sheet review checklist

Tick each line once the term sheet matches your plan; the text after each dash is what to check.

Which red flags should make you pause?

• Fees with no names, or "other fees as needed."
• A maturity date shorter than you discussed.
• A rehab holdback that doesn't cover the budget you submitted.
• No mention of how draws work.
• Interest charged on the full loan when you were told drawn funds only.
• Large non-refundable deposits before you've seen the full terms.

Example: catching a term sheet mismatch (hypothetical)

Example for illustration only.

An investor discussed a 12-month term and a full rehab holdback with a lender. The term sheet shows a 12-month term, but the holdback is $15,000 short of the submitted budget, and it says nothing about extensions. The investor asks why. The lender explains that one budget line wasn't supported and asks for a contractor bid. The investor sends the bid and asks for the extension terms in writing. The revised term sheet fixes both. Without the line-by-line review, the investor would have found a $15,000 hole mid-renovation.

How do you compare two term sheets side by side?

Line them up using the same checklist and turn every difference into dollars or days. Compare cash to close at the offered leverage, total cost at your planned payoff month and at maturity, the draw process and fees, and the extension terms. A lower rate with interest charged on the full loan, or a shorter term with no extension option, can easily cost more than a slightly higher rate with better structure. Write a one-line summary of each offer's main advantage and main risk. That usually makes the decision clear.

Key takeaways

• Treat the term sheet as a checklist against your plan, line by line.
• Every cost, every date and the draw process should be written on it.
• Confirm term and maturity in writing before you rely on them.
• Know which parts are binding, and ask an attorney if unsure.
• Final loan documents control, so check that they match the term sheet.

Get terms you can check line by line

Submit your deal for terms, or review the Bridge Loans page. General education only, not legal advice. Have an attorney review loan documents.