Bridging loans

Bridge loans as the name suggests is like a bridge used to shift from one place to another. In terms of loans, it is a temporary loan that bridge the gap between the sales price of a new home and a home buyer’s new mortgage, in the process the buyer’s home has not yet sold. Bridge loan is secured to the buyer’s existing home. The funds from the bridge loans are then used as a down payment on the move-up home. In simple words when a home buyer is buying another home, down payment is made through bridge loans.

There are many advantages and disadvantages of bridge loans. Some of the advantages includes:

• Without any restrictions the buyer can immediately put a home on a market.
• Bridge loans may not require monthly payments for a few months.
• If the buyer has made a contingent offer to buy and the seller issues notice to perform, the buyer can remove the contingency to sell and still move forward with the purchase.

Some of the drawbacks of bridge loans includes:

• Bridge loans are costlier than home equity loans.
• Buyer will be qualified by the lender to own two homes and many will not meet this requirement.
• Thus can cause stress and tension as you have to make two mortgage payments, plus accruing interest on a bridge loan.

It’s really important to know the working of bridge loans as some lenders who make confirming loans exclude the bridge loan payment for qualifying purposes meaning that the borrower is qualified to buy the move-up home by adding together the existing loan payment, if any, on the buyer’s existing home to the new mortgage payment of the move-up home. This happens because most buyers have an existing first mortgage on a present home and the buyer will own two homes for a short time period. Applying online for bridge loans is the best option as it provides many benefits to the customers.