There are many loan options that can be helpful for homeowners going through the process of purchasing a new home. Bridge loans are one of these options, and it may be right for you. The best way to determine this for certain is to speak to a professional. At The Busch Team, we pride ourselves on putting our clients first and helping them understand the loan options available to them.
Important Things to Know About Residential Bridge Loans
What is a residential bridge loan? It is a loan that allows individuals the ability to borrow money for up to a year. It goes by many names, but what is consistent is that the borrower must use some asset, such as their home, as collateral. Their interest rates can range from 8.5% to 10.5% which means that they are more expensive in terms of interest than other long-term financing options. What makes them appealing is that the application process as well as the underwriting process is much faster than what it would be for a traditional loan.
A homeowner may be interested in a bridge loan if they are planning on buying a new home. This is because the homeowner can put a down payment on their new home with equity from their current home with a bridge loan. Bridge loans are helpful for homeowners who want to be able to access funds for a new house without selling their current property. With this type of loan, the homeowner could pay back the loan in a six to twelve month time period with the sale of their new home.
The only caveat with this type of loan is that you must be able to sell your home in a short window of time. Because bridge loans are short-term financing solutions, if you are not able to sell your home within the allotted time frame, you will be responsible for the repayment of the loan, your current mortgage, and your new mortgage all at once.
Is It Right For You?
Because bridge loans have both upsides and downsides, it is important that homeowners know when it would be best suited for them to take out a bridge loan versus other loans. Bridge loans can be a great choice for those who are purchasing a new home in a competitive market because it allows them to get the money they need for the down payment quickly. Another situation that may require a bridge loan is if the seller of the property that you are interested in will not accept a contingency offer. More generally, a bridge loan can help those who cannot afford a down payment for a new home without the sale of their current home.
Residential bridge loans can also make sense for people who do not want to have a gap between the time in their current home and when they will move into their new home. This is especially the case if the current home will not be closed on until after closing on the new house.
Contact Us Today
Residential bridge loans can be helpful for some homeowners who are in the process of purchasing a new home. However, it can be tough to determine if it is right for you on your own. That is where an experienced mortgage broker can help. At The Busch Team, we can help you figure out what loan options are right for you. If you are interested in learning more about our services and whether a bridge loan is right for you, contact us today.