If you’re planning to buy a second home but can’t afford to wait, you may want to consider a Bridge Loan. While this loan may be more expensive, it is a good way to buy a second home until your first one sells. The drawback of this type of loan is that you’ll end up with three loans instead of one. It’s important to read all of the terms and conditions before signing on the dotted line.
The most common reason to obtain a bridge loan is a short-term source of funds. During this time, the property is on the market and a potential buyer is making a contingent offer. When this happens, the bridge loan will fill the gap between the sale and the offer. The borrower can use the proceeds to pay off the loan at the end of the term. When a bridge loan is used to finance a short-term transaction, the benefits of a Bridge Loan are clear.
Joseph Stone Capital says One common use of a Bridge Loan is to pay off your old home while you shop for your next place. It can be as large as 85% of the home’s value (SEV) or just a down payment. In this case, the bridge loan would pay off the old mortgage and leave the borrower with $18,000 to buy their next place. The information provided here is for educational purposes only and may vary with lenders. It is always best to contact a licensed mortgage lender before taking out a Bridge Loan.
Bridge Loans are typically higher than a conventional mortgage. The interest rate can be as high as 2% over the prime rate. They also tend to have higher origination and closing costs than a conventional mortgage. Additionally, they may have longer payment terms, which means you’ll end up paying more interest on the loan. This isn’t a bad thing, but you should consider it carefully before committing to a Bridge Loan before making the final decision.
Joseph Stone Capitalsays You should always compare different commercial bridge loans before choosing a Bridge Loan. This way, you can find the best possible deal and get the most suitable funding. It may be cheaper than a traditional business loan but be sure to compare lenders to find the one that suits your needs. It’s also helpful to look at the reputation of the lender and the terms and conditions of the loan. You can also compare the interest rates, fees, and repayment schedule.
Bridge Loans are a good option for those who are planning to buy a new home but don’t have the funds to pay off their current mortgage. These loans help homeowners to transition from one mortgage to another while avoiding the hassle of selling their current home. However, they can be expensive and can require a large amount of equity in the current home. If you have a decent amount of equity in your current home, you can consider a bridge loan as a way to finance your new home.
