Are you considering selling your current property and closing on a new property in the future? If so, then bridge financing may be a smart option to consider when relocating and moving to a new home.
A bridge loan is a short-term loan with approximately 3–12-month terms, where a homeowner borrows against the existing equity in their property. Bridge loans aid in the ability to access considerable equity to purchase new property.
Upon the closing of the property, bridge loan funds will be paid in full, from the sale of the past home. Bridge loans can also be used to pay off other immediate debts or financial concerns to aid in increasing the equity of the former home.
Yet, typically bridge loans are used for purchasing a new property before selling the original. Therefore, a bridge loan can help fill the short-term financial gap between selling an old property and closing on a new one.
Substantial equity from your current home is required to fully benefit from a bridge loan. Common use of bridge loan funds are to put a deposit on the new property you’re buying or quick immediate renovations that the purchaser may require.
Bridge loans typically take 3-5 business days to process from a private lender and bridge loans allow for pre-sale equity before selling your old home. Private lenders will lend to people with bad credit if the bank turns down a homeowner.
Bridge loans are generally cheaper because the lender knows when they’re loan is being repaid. At times the lender may not require an appraisal.
Banks will assess your credit to income ratio to determine if you are eligible for a bridge loan. There is no maximum loan amount for a bridge loan and lenders maybe more flexible even if you have bruised credit, as they know the date their loan is repaid.
