Bridge Loans

Bridge Loans

What is a Bridge Loan?

A bridge loan is a short-term loan that is designed to fill the financial gap that occurs between purchasing a new property and selling the one you already own. Sometimes you want to buy a house before you sell your current one, even if this means you won't have the earnings from your current home sale available for the down payment on your next property. If you were counting on that money to put a down payment on a new house, then this might be a problem for you. For the time being, you have the option of submitting an application for a bridge loan in order to assist in financing the acquisition of a property.

Fast process

Easy processing

Control over policy

Save your money

BENEFITS OF BRIDGE LOANS

Pros of Bridge Loans

Advantageous in a market where sellers have the upper hand.

Your application for a bridge loan can be viewed as more competitive if the market is particularly active and there are a lot of other purchasers vying for the same properties as you. A bridge loan has the potential to eliminate any financial stipulations that were included in your offer. Because it provides a more solid assurance that the transaction will be finalized, a seller will find this to be quite appealing.

Avoid Private Mortgage Insurance

If you put down a down payment equal to or greater than 20 percent of the home's purchase price, you won't be required to pay for private mortgage insurance (PMI). Your monthly mortgage payments will go up and you will be obliged to have private mortgage insurance (PMI) if you do not put down at least 20 percent.

Access to capital

A commercial loan provides businesses with access to capital that they can use to grow and expand. This can be especially important for small businesses that are just starting out and need financing to get off the ground.

Improved Credit History

By making timely payments on a commercial loan, a business can improve its credit history and increase its access to financing in the future. This can be particularly beneficial for businesses that are just starting out or that have a limited credit history.

CONS OF BRIDGE LOANS

BRIDGE LOANS

Higher interest rates.

The interest rates on bridge loans need to be higher than average because they are intended to be used only temporarily. Because of the increased interest rates, it is profitable for the lender to issue the loan.

As a homeowner, a bridge loan will ultimately cost you more.

The bridge loan is a financial resource that may be advantageous or required in the present, but keep in mind that the interest and other fees you pay are out-of-pocket expenses that you will not receive back.

How does a Bridge Loan work?

  1. The borrower applies for a bridge loan and provides information about the sale of their current home and the purchase of the new home.
  2. The lender evaluates the borrower's financial situation, including the amount of equity in the current home, the expected sale price of the current home, and the amount of the down payment for the new home.
  3. If the lender determines that the borrower is eligible for a bridge loan, the loan is approved and the borrower is provided with the funds to purchase the new home.
  4. The borrower makes payments on the bridge loan while they work to sell their current home.
  5. Once the current home is sold, the proceeds from the sale are used to pay off the bridge loan.

It's important to note that bridge loans are typically more expensive than traditional loans because they are short-term and carry a higher level of risk for the lender. They also have stricter repayment terms and often require the borrower to have a substantial amount of equity in their current home.

How to get a Bridge Loan

Getting a bridge loan involves the following steps:

  1. Determine if a bridge loan is right for you: A bridge loan is a short-term loan that is intended to provide temporary financing while you are waiting for your existing property to sell. It is typically more expensive than a traditional loan, so it is important to consider whether a bridge loan is the best option for your financial situation.
  2. Evaluate your financial situation: To get a bridge loan, you will need to demonstrate to the lender that you have the financial means to repay the loan. This includes evaluating your income, assets, and credit history.
  3. Choose a lender: There are many lenders who offer bridge loans, including traditional banks, online lenders, and specialized bridge loan lenders. You will want to compare the terms, fees, and interest rates of several lenders to find the best deal.
  4. Apply for the loan: Once you have chosen a lender, you will need to complete an application for the loan. The lender will typically ask for information about your current property, the property you are purchasing, and your financial situation.
  5. Provide documentation: The lender will likely require you to provide documentation to support your loan application, such as proof of income, proof of ownership of your current property, and an appraisal of your current property.
  6. Wait for approval: After you have submitted your application and documentation, the lender will review your information and determine whether you are eligible for a bridge loan. If your application is approved, you will receive the loan funds and can use them to purchase your new property.
  7. Repay the loan: Once your current property has sold, you will need to repay the bridge loan. The repayment terms will be outlined in the loan agreement, and it is important to understand them and make payments on time to avoid defaulting on the loan.


It's important to compare the terms and fees of several lenders before choosing one for your bridge loan. You should also consider your personal financial situation, including your credit score, assets, and income, when evaluating potential lenders. It may also be helpful to speak with a financial advisor or real estate agent to get recommendations for lenders that may be a good fit for your needs.

Eligibility

You must have sufficient income and credit history to qualify for a conventional mortgage.

Talk to a Loan Expert

Loan experts at Mpire Financial have extensive knowledge and experience in the loan industry, which allows them to guide you in making informed decisions about your finances. Call us directly or go to our Contact page and fill out our form for a callback.

The Mortgage Process

Getting a mortgage for a home involves a number of significant steps. We will be there for you every step of the way as your loan officer to make sure you are prepared for each and that you go through them efficiently.

Find The Right Loan

We have a wider variety of home loan programs to choose from. There are many options for homeowners looking to tap into their home equity, from first-time buyer loans to refinancing.

Mortgage Calculator

How much is the mortgage? How much money can you save if you refinance your mortgage? Is it wiser to buy or rent? Make your own calculations with these online calculators so you may draw your own conclusions.

MOST ASKED QUESTIONS

Bridge Loan FAQs

  • Who uses bridge loans?

    Bridge loans are often used by real estate investors and homebuyers who need to purchase a new property before selling their current one.

  • How long are bridge loans?

    Bridge loans are typically short-term loans with a duration of 6-12 months.

  • Are there any fees associated with bridge loans?

    Yes, there may be origination fees, closing costs, and other fees associated with a bridge loan.

  • Who Qualifies for a Bridge Loan?

    To qualify for a bridge loan, the borrower must have a good credit history and a steady income. Additionally, the existing property must have enough equity to secure the loan.

  • How Much Does a Bridge Loan Cost?

    The cost of a bridge loan varies depending on the lender, the loan amount, and the terms of the loan. On average, bridge loans have higher interest rates than traditional loans, but the exact cost will depend on the specific loan.

  • What are the Advantages of a Bridge Loan?

    Advantages of a bridge loan include: allowing for a smooth transition between properties, quick and easy approval, and flexible terms.

  • What are the Disadvantages of a Bridge Loan?

    Disadvantages of a bridge loan include: high interest rates, short repayment period, and the risk of losing the existing property if the new property is not sold or refinanced in time.

  • How to Get a Bridge Loan?

    To get a bridge loan, the borrower must find a lender that offers bridge loans and apply for the loan. The lender will then review the borrower's financial situation, including credit history and income, and determine if they are eligible for a loan.

  • What are the risks of a bridge loan?

    The main risk of a bridge loan is that if the existing property does not sell within the expected time frame, the borrower may be left with a large, short-term loan that they cannot repay. Additionally, bridge loans often have higher interest rates than traditional mortgages.

  • How long does a bridge loan last?

    Bridge loans are typically short-term loans, lasting anywhere from several months to a year. The length of the loan depends on the specific circumstances of the borrower.

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