What is a Bridge Loan and how do you use them?
Getting closing dates to line up when buying and selling a home can be quite tricky!
For buyers, this is can be very crucial as they typically depend on the proceeds from the sale of their existing home to make the down payment on their next home.
But when this isn't possible, a bridge loan or bridge financing could be the next solution!
All about bridge loans
The purpose for bridge loans is to "bridge" the gap between the time that the homeowner sells their current home and closes on their next property.
This allows them to make the down payment on their new home while waiting for their existing one to close. This makes bridge loans a temporary solution that ranges from a few days to a few months.
Because this would be a short-term loan, bridge financing has higher rates than what a typical mortgage would. In addition, lenders may charge an administration fee and legal fees may also be involved, depending on your situation.
Pros and cons of bridge loans
Bridge loans are a great solution, and they are generally easier to qualify for. This is because lenders know that you will have the money to repay the loan once your sale is finalized.
This also creates additional purchase options, as you won't have to worry about closing deadlines. This can relieve a lot of stress and bring a peace of mind knowing that the down payment for your next property is ready to go.
Even with the higher interest rate, bridge loans are still cost-effective as it's for a much shorter term. As long as the sale of the property is finalized, you won't have to worry about any financial obligations!
If you are interested in bridge financing or would like to learn more about what options you have for your specific situation, reach out to us today!