If you’re currently in the financial throes of buying or selling a property, one term you may have heard mentioned is a “bridge loan.” A bridge loan is a short-term bank loan of the equity in the home you are selling. Usually, homeowners take out a bridge loan to wiggle out of a tight spot.
Maybe you’re closing on the home you are buying before you close on the property you are selling. This loan basically enables you to have a place to live after the closing of your existing home.
But why a bridge loan and not a home equity loan? While a home equity loan is less expensive, bridge loans contain more benefits for some borrowers. These benefits can include deferred monthly payments, and the fact that the buyer can immediately put a home on the market without restrictions.
The key to a bridge loan is having a qualified buyer and a signed contract. Usually, the lender issuing the mortgage loan on the new home will write the interim financing as a personal note due at settlement on the property being sold.
If, however, there is no buyer for the property you have up for sale, most lenders will place a lien on the property, thereby making that bridge loan a kind of second mortgage.
It can be complicated, so make sure you have thought out all the details before acquiring a bridge loan. Be sure to remember that there are costs and fees involved with bridge loans, and interest rates are usually quite high.
Don’t feel comfortable with a bridge loan? A few other options are borrowing from your 401(K). Actually, any secured loan is acceptable to lenders for the down payment. This includes stocks, bonds or an insurance policy.
For more information on bridge loans, please contact RE/MAX of Boulder, Inc. at 303-449-7000, or 1-800-825-7000.
RE/MAX of Boulder, Inc. located on the corner of Canyon and Folsom, is nationally and locally recognized as one of the most successful real estate offices in the industry. Nationally, they are one of the "Top 500 Power Brokers in the United States" as listed in National Real Estate & Relocation magazine. Real Trends ranked them #1 in the Nation for Closed Sales Volume for 2010. Regionally, for the 5th year in a row, the company has been named the #1 RE/MAX office in America for Single Office Closed Volume. They can be reached at 303.449.7000 or visit http://www.BoulderCO.com. Connect with them on Facebook and Twitter, search remaxofboulder. Subscribe to their YouTube channel and see videos of all their homes for sale at http://youtube.com/remaxofboulder