Having to Sell then buy? We can help!
Selling a home before buying a new one presents several challenges for homeowners. These include navigating the timing of both transactions, dealing with financial pressures, and finding temporary living arrangements. Homeowners must be prepared to balance their search for a new home while ensuring their current property is market-ready. Additionally, they may need to secure bridge financing or adjust their budget based on fluctuations in the housing market. Despite these challenges, careful planning and working with experienced professionals can help homeowners successfully manage the process.
What is a Bridge Loan?
Bridge loans, also known as interim financing, gap financing, or swing loans, provide a much-needed bridge during times when financing is needed but not yet available. Individuals and companies alike can benefit from these loans, which are tailored to a variety of different situations.
Bridge loans are especially helpful for homeowners who are looking to buy a new home, but are waiting for their current home to sell. The equity in their current home can be used as a down payment on the purchase of a new home, so they don’t have to wait for their old house to sell before buying the new one. Although bridge loans come with higher interest rates than other credit facilities, like home equity lines of credit (HELOCs), they can provide valuable peace of mind during this transition period.
Lenders typically only extend bridge loans to borrowers with good credit and low debt-to-income (DTI) ratios. When a bridge loan is taken out, it rolls the mortgages of two houses together, giving the buyer the flexibility to wait for their old house to sell before making a purchase.
Real estate bridge loans are also common when people are waiting to sell their old home in order to pay off their mortgage. These loans require borrowers to make two payments – one for the bridge loan and one for the mortgage – until the old home is sold.
Do you need quick access to funds? A bridge loan may be the solution. Bridge loans offer convenience by having a shorter funding process than traditional loans. However, they usually come with short terms, high interest rates, and large origination fees.
Despite the high costs, borrowers often accept these terms for the convenience and fast access to funds. They plan to pay off the loan quickly with low-interest, long-term financing, and there are usually no repayment penalties.
Bridge loans provide short-term cash flow, such as allowing a homeowner to purchase a new home before selling their existing one. However, they usually have higher interest rates than traditional loans and can be costly if you have to make payments on both the bridge loan and your existing mortgage.
To qualify for a real estate bridge loan, you’ll need an excellent credit score and a low debt-to-income (DTI) ratio. With the right qualifications, a bridge loan can provide quick access to funds and help you achieve your financial goals.