Mortgage Broker Beverly Hills | What is a Bridge Loan and How Can it Help You Buy Your Dream Home?
Mortgage Broker Beverly Hills – Selling your home is a complicated process, and there are often financial considerations that need to be taken into account. One of the most important of these considerations is a bridge loan. But what is a bridge loan, and how does it work? Let’s take a look at what you need to know about bridge loans and how they can help you in the home-selling process.
How Does a Bridge Loan Work?
A bridge loan is essentially an interim loan — it bridges the gap between when you sell your current house and when you purchase your next one. In other words, it helps ensure that you have the funds necessary to buy your new house before selling your old one. Bridge loans are typically short-term loans — generally lasting no more than 12 months — and they are usually secured by the equity in your current home.
Bridge loans can be helpful for home sellers who need to purchase their next home quickly but don’t have all of their funds readily available from the sale of their previous property. A bridge loan can cover up to 100% of the down payment on your new home; however, this amount may vary depending on the lender and other factors. Additionally, many lenders will expect collateral for the loan (such as stocks or bonds) in addition to having equity in your current home as security for repayment of the loan.
Do you make monthly payments on a bridging loan?
No, you do not have to pay back a bridging loan every month. With bridge loans, the principal and interest are both paid back at the end of the term. Most of the time, this is done by refinancing or selling a home.
What is the maximum term for a bridge loan?
Bridge loans are usually short-term loans that last between 6 months and a year on average.
What happens when a bridge loan matures?
Typically, if the borrower doesn’t refinance the bridge loan at the end of its one-year term, the loan will automatically be turned into long-term financing.
What are the cons of a bridging loan?
- Payments are normally higher because it is short-term financing
- It can be risky if you can’t make a payment in the future.
- Interest rates may be higher than with traditional loans.
Is it worth getting a bridging loan?
Bridge loans can be incredibly helpful when it comes to purchasing a new home especially if you only have enough money saved up for a down payment on the new property before your existing property has been sold. Instead of waiting around and potentially missing out on your dream home, bridge loans allow you to purchase it now and pay off the loan when your property has been sold. This saves you from having two mortgages at once, as well as helping with closing costs and saving you money on interest payments in the long run.
If you think this type of loan could be right for you, consider speaking with an experienced mortgage broker like us at Mortgage Broker Beverly Hills who can help walk through your options and determine if this type of financing makes sense for your situation. To get answers to other frequently asked questions visit our website and blog section: Mortgage Broker Beverly Hills and Mortgage Broker Beverly Hills Blog