![]() You must also have at least 20% equity in your current house to be eligible. The lender will review your credit report, credit score, debt-to-income ratio, and income to ensure you’re creditworthy and can repay the debt. Qualifying for a bridge loan is similar to qualifying for a standard mortgage. Generally, you can expect to pay several thousand dollars to secure your bridge loan (especially if you borrow a large sum). You may also have to pay for a home appraisal. You’ll also have to cover loan origination fees and closing costs. Therefore, bridge loan rates are roughly two percent higher than regular mortgage rates. Lenders typically charge a higher interest rate for short-term loans to maximize their revenue. Here are the top three downsides: Rates and fees On the other hand, bridge loans do have some potential pitfalls. Your lender could also require interest-only payments until your property sells.īonus perk: A bridge loan can help you make a competitive, non-home sale contingent offer on a property in a hot real estate market. Some lenders will require monthly payments throughout the life of the loan, while others will defer payments until your home sale deal closes. Typically, you’ll use the cash you get from your home sale to repay your bridge loan. (However, the loan may take two to four weeks to close). You could get the funds you need in as little as a few days. While every situation is different, you can generally get a bridge loan fast. ![]() If you sell your home quickly, you may only have the loan for a few months. However, you’ll repay your bridge loan in less than three years. Many standard mortgage terms run for decades, making it feel like you’re in debt forever. Here are three of the most significant: Short-term debt Advantages and benefits of bridge loansīridge loans have several advantages and benefits. You can also take out a large enough bridge loan to pay off your first mortgage and cover your down payment. The loan can be a small second mortgage on your current home, giving you enough funds for a down payment. Also called gap financing, interim financing, or a swing loan, a bridge loan can help you buy your new home before your current property sells.īridge loan terms range from six months to three years but generally end within 12 months. Understanding bridge loansĪ bridge loan is a short-term loan that's generally used to facilitate a real estate purchase. There’s a financial product designed to help you get through this nerve-wracking (but common) situation: the bridge loan. You committed to being in your new employer’s office in five weeks. Your old house isn’t even under contract yet. Unfortunately, you need the proceeds from selling your current home to afford the downpayment. ![]() Within a week, you found a property you love. So, you listed your home for sale and started looking for a house to buy in your new state. You just accepted your dream job offer and plan to move across the country for it within the next several weeks.
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