Is a Bridge Loan Right for You?
Bridge loans are temporary funding secured with the existing property. It is called a “bridge loan” because it “bridges” the gap to help you purchase a new property while you are waiting on your existing property to sell. These loans are quite popular, but there are some things you need to keep in mind before deciding if this funding is appropriate for your situation.
How Do Bridge Loans Work?
You will need to work with a lender to apply for a bridge loan. The approach to funding is more of a “does this make sense?” approach. Lenders don’t typically require a minimum FICO score or look at debt-to-income ratios.
Advantages of Bridge Loans
There are a few advantages to bridge loans:
You can purchase your new property while your current one is on the market without any restrictions
You may be allowed to have a few months where you are not required to make payments
Even after removing the contingency to sell, you may still be able to purchase a new property
Disadvantages of Bridge Loans
On the other hand, there are also some disadvantages:
Typically will cost more than home equity loans
You must qualify to own two properties
Can be stressful to balance paying two mortgages plus the bridge loan
Fees Associated with Bridge Loans
You should be aware that there are several fees associated with these types of loans, such as administrative and appraisal fees. Certain fees have a higher rate than others. In addition, terms vary according to the lender and your interest rates will fluctuate as well.
Bridge loans are a great option for those who need to get into a new property before their current one sells. However, you must weigh the advantages and disadvantages to decide if this is right for you. Contact Summit Commercial Capital for more information and for help navigating through the application process.