What is a bridge loan? Bridge loans are popular when you are purchasing another home before selling your current one.
In that scenario, there are two common ways to find the down payment for the new home. One way is financing through a bridge loan and the other is a home equity loan, or line of credit.
I advise sellers to wait until they sell their current home before they buy another one. However, some people can’t do that.
Bridge loans are temporary loans that bridge the gap between the sales price of your new home and the new mortgage in the event that your home has not yet sold. The bridge loan is secured to your existing home. Then, the funds from the bridge loan are used as a down payment for your move-up home.
There are benefits to using a bridge loan. For one, you can immediately put your home up on the market without any restrictions. Plus, bridge loans may not require monthly payments right away. Also, if you make a contingent offer on a property and the seller offers a notice to perform, you can remove that contingency, sell the house, and still move forward with that purchase.
If you have any other questions about bridge loans, we work with a terrific financing company called Veritas Funding that we can connect you with. As always, if you have any real estate questions, give me a call or send me an email. I would be happy to help you!