If you are thinking about selling your home and moving into a new one, you may be looking at figuring out the financing. This is especially true if you are trying to buy a home, before your old one sells. If that is the case, you may be thinking about a bridge loan.
So, what is a bridge loan?
A bridge loan is a short-term loan that allows them to borrow money for up to a year. These loans often require collateral, such as your home or another asset that you may have. They often have higher interest rates than long-term mortgages.
How do these loans work?
Bridge loans are commonly used when a home buyer found their new home, before they sold their old one. Since they will need a downpayment in order to buy their new home, they may be looking for a short-term loan to help them until their home sells. Their bridge loan will use their current home as collateral.
Once they sell their home, they can pay off their bridge loan. This will leave them with only one mortgage loan on their new home. That being said, if their current home doesn’t sell, they will have to pay their new mortgage, old mortgage, and their bridge loan, which makes it slightly risky.
So, is a bridge loan right for you?
If you are serious about buying a new home, without selling your old one first, you may want to consider a bridge loan. However, you really need to consider the following before you decide to do so.
- Bridge loans work best in a seller’s market. This means that there is a good chance that your home will sell quickly, so that you don’t get too overwhelmed with your payments.
- You may need to have a bridge loan if the sellers don’t allow you to submit an offer that was contingent on the sale of your first home. Many sellers will allow you extra time to sell your home. However, if they won’t, you may want to consider a bridge loan so that you don’t lose out on your dream home.
- You don’t have any money saved up for a downpayment. Most people have their money tied up in their homes and all of their other expenses. They don’t have several thousands of dollars laying around to put toward a downpayment. They can’t get one without a bridge loan to help.
- You may also be in a hurry to close on your new home. If your current home has a contract, but it won’t settle in time, you can use a bridge loan to get you through.
That being said, business owners can also take advantage of bridge loans. They may need some short-term cash to get them started, while they wait for their long-term loan (which is more affordable). They may also use it to purchase real estate quickly. They may also use it to help them buy supplies that they need to get their business up and running (or to keep it going).
In order to determine if a bridge loan is right for you, you have to look at the good points, as well as the bad ones.
Here are some reasons why you should consider a bridge loan.
- You can get the cash faster with a bridge loan. The whole process takes a lot less time than traditional loans.
- It may allow you to buy the home that you want, without worrying about selling your own
If you are struggling to figure out how to finance your next house (or business move), don’t hesitate to contact us today. We will be glad to talk to you about your options so that you know you are doing what is best for you.