Bridge Loans Can Fill The Gap
Mortgage bridge loans are designed so that they are a short term loan that will allow you to get into the new home even if the old home has not sold yet. Bridge loans help to pay off the mortgage on the current house and then the money that is left could be used as a down payment on the new house. That way it will not be necessary to wait for the old house to sell before you can buy your new home.
Usually bridge loans will not require a payment for at least the first six months of the loan. If your old home has not sold within those six months, you will have to start making payments, however those payments would be interest only payments because you won’t want to be building equity in the old home. You are trying to sell the older house and not use it to live in or as an investment. After your home sells, the bridge loan is then paid off and you can get a more traditional type of financing for your new home.
Bridge loans really come in handy for those that want to or have to move if their old home won’t sell right away. Maybe you need to move closer to a sick relative or have a job transfer, then this type of loan would be a great option for you. On the other hand, you may be anxious to purchase your new home before someone else gets it.
Although bridge loans can be a wonderful solution for some, they also have some disadvantages. Due to being a short term, risky loan they will have a higher interest rate and fees that you will not see with the traditional mortgage loans. That means you will be paying more money.
A typical situation with bridge loans is that you will have to use the same lending company that provided the bridge loan to finance your new home. This could lock you in on terms that are not as favorable as a different lender could give. In general, the closing costs can vary from lender to lender and the actual closing costs, fees, interest rates and terms can vary on bridge loans. Some lenders will not even offer bridge loans. Before you sign on that line, it is important to understand all the terms of your bridge loan.