Everything You Need to Know About Bridge LoansFebruary 20, 2023 by X2 Mortgage
Sometimes, you may want to make an offer on a new home while you are still waiting to finalize the sale on your old home.
This leaves you in a position where you may need some extra funds to help you cover the costs involved with your home purchase. A bridge loan can help you finance that gap.
What are Bridge Loans?
A bridge loan is a short-term financing product that acts as a “bridge” when you are moving from one home to another.
Other names for bridge loans include “gap financing,” “interim financing,” “swing loans” and “bridging loans.”
This type of loan is secured by your existing home, and features a rapid underwriting process so you can qualify quickly.
How Bridge Loans Work
Let’s say you are still trying to sell your current house, but you want to make an immediate offer on a new home.
You borrow against your existing home with a bridge loan. You now have the money you need to pay your down payment and closing costs for your new home.
The seller accepts your offer, and you buy the home. After that, your old home sells. You can now use the proceeds from the sale to pay off the bridge loan.
Benefits of Bridge Loans
- Beat other buyers to the purchase of a home. You do not always have the luxury of waiting for your existing home to sell before you make an offer—not if you are intent on getting the home you really want. A bridge loan gives you the means to make an immediate offer so you do not miss out on your chance to live in your dream home.
- Avoid rushing the sale of your existing home. If you are trying to sell your home as fast as possible, you may take the first offer your receive. That offer might not be the best one though. A bridge loan gives you extra time to evaluate additional offers. If your receive a higher offer by waiting a few more weeks or months to sell your home, the additional money you receive from the sale may be worth it.
- Keep your move flexible and simple. With a bridge loan, you can stop worrying about getting the timing of your home sale and purchase exactly right. You can let the process be more organic. Plus, a bridge loan helps you to keep your finances more fluid all around. With all the associated costs of moving, that can be a big help.
- Choose a suitable repayment option. There are multiple repayment options for bridge loans. We can help you choose one that will fit with your financial scenario.
Is an Bridge Mortgage Loan Right For You?
Here are some examples of scenarios where you might use a bridge loan:
- When you have just found your dream home. Being able to take out a bridge loan can sometimes mean the difference between being able to make your dream home your own or losing the chance.
- When you are changing jobs. If you have to relocate for work-related reasons, you might be on a tight timeline. Using a bridge line may help you to relocate in a timely fashion even if you are still working on selling your old home.
- When you want to boost your negotiating power. You can use a bridge loan to remove contingencies when you make an offer on a new home, which can help sway a seller.
- When you want to simplify your life. Buying a home while selling another can seem complicated. A bridge loan can remove a lot of the complications, particularly as they pertain to your schedule. You may enjoy the reduced stress that comes with that enhanced simplicity and flexibility.
While bridge loans have many benefits, they do feature high interest. You will need to evaluate the pros and cons as pertain to your particular situation. During your consultation, we can help you figure out if a bridge loan will help you achieve your goals.
Qualifying for a Bridge Loan
As with other financial products, bridge loans have an approval process. Your credit score, debt-to-income (DTI) ratio, and income will be assessed. You also will need sufficient home equity to borrow against.
Get the Flexible Financing You Need as You Buy and Sell
You might only get one shot at owning your dream home, and you don’t want to miss it. With a bridge loan, you can procure the financing you need to buy your dream home immediately while you wait for your old home to sell. Please call us today at (480) 992-4200 to schedule your consultation for a bridge loan. Based in Chandler, Arizona we serve clients in numerous different states and markets.