What is a gap loan in real estate?

A gap loan is short-term financing that fills the difference between the money a closing requires and what the primary lender, seller or buyer provides. It is meant to be repaid from a defined source soon after closing.

Is gap funding the same as a second mortgage?

Not necessarily. Some gap funding is secured by the property, and some deals use other structures. The key feature is its purpose and short life, not its lien position.

How fast can gap funding close?

Timing depends on title and the other parties to the deal as well as the lender. See Axelrad's gap funding page for current timing.

How much does gap funding cost?

Axelrad's gap rates start at 2.5%. The final price depends on the amount, the deal and the repayment plan, so get the full cost in writing.

How is gap funding repaid on a seller-finance deal?

It is typically repaid after closing through the seller carry, though the exact method depends on how the deal is structured. Settle the repayment plan before you close.

What Is Gap Funding in Real Estate? Uses and Repayment

Where does the "gap" come from?

Every deal has a total amount that has to show up at the closing table. Most of it comes from a primary source: a purchase loan, a seller carrying a note, or the end buyer's money. The gap is whatever is left.

Common examples in investor deals:

Creative acquisitions. A seller-financed or subject-to purchase where the seller's terms leave cash still owed at closing for the seller's equity, arrears or costs.
Title problems. A lien, probate issue or other cloud that has to be paid or resolved before a sale or refinance can close.
Partner buyouts and debt restructures. Buying out a partner or paying off a lender on a timeline the next loan cannot meet.
Delayed refinance funds. A takeout loan (the long-term loan that replaces short-term money) that is coming, but not soon enough.

Axelrad's gap and cash advance program lists these uses directly: title cleanup, debt restructure and buyout support, and preparing for a refinance or DSCR loan.

How is gap funding repaid?

Gap funding is short by design, so the repayment source matters as much as the amount. Repayment happens several ways depending on the deal. On creative acquisitions, it is typically repaid after closing through a seller carry. Other deals repay from a refinance, a sale or a later closing.

Deal type	What creates the gap	Common repayment source
Seller-financed acquisition	Cash owed at closing beyond the seller's terms	After closing, through the seller carry
Title cleanup	Lien or cloud blocking a closing	The sale or refinance that follows
Delayed refinance	Takeout loan not ready in time	The refinance proceeds
Partner buyout	Cash needed before new financing	New financing or sale

What does gap funding cost?

At Axelrad, rates start at 2.5%. The gap page describes it as premium pricing for speed and flexibility, built for people who cannot afford to wait. The actual price depends on the deal, the amount and the exit. Ask for the full cost in writing and compare it against what the deal earns if it closes on time.

A worked example

Example only, with hypothetical round numbers. You agree to buy a rental for $240,000. The seller agrees to carry $200,000 as a note. The seller wants $30,000 at closing, and closing costs are about $6,000. You have $10,000 available.

Total needed at closing: $36,000. Your cash: $10,000. The gap: $26,000.
Gap funding covers the $26,000 so the purchase closes on time.
The repayment plan is set before closing. On a creative acquisition like this one, gap funding is typically repaid after closing through a seller carry, according to how the deal is structured with the lender and the seller.

The numbers are illustrative. What matters is that the gap has a defined repayment source on day one.

When is gap funding the wrong tool?

When there is no clear way out. Gap funding is not meant to cover a deal that only works if something unknown goes right later. It is also not the right product for a same-day resale, which is what transactional funding does, or for a renovation hold, which is hard money or bridge territory. The creative finance division explains how these short instruments fit together.

What does a lender want to see?

The purchase or payoff documents showing the total needed at closing.
Where the rest of the money is coming from.
The specific repayment source and its expected timing.
Title status, and any liens or clouds involved.

Axelrad's gap page notes both equity-based and credit-based options.

The more specific the repayment source, the faster the review. "I'll refinance" is a plan; "a DSCR refinance with this lender, application submitted, appraisal ordered" is a plan a lender can underwrite. The same goes for a seller carry: send the agreed terms, not just the idea.

Key takeaways

Gap funding covers the shortfall between what closing needs and what your main sources provide.
Common uses: creative-finance cash to close, title cleanup, buyouts and delayed refinances.
At Axelrad, gap pricing starts at 2.5%; see the gap funding page for current terms and timing.
Gap funding is repaid several ways, typically after closing through a seller carry on creative deals.
No clear repayment source means gap funding is the wrong tool.

Short at the closing table?

If your deal works but the cash to close does not, send it to Axelrad with the repayment plan, and the team will review the gap. Details are on the gap funding page.

What Is Gap Funding in Real Estate?