Benefits of a Bridge Loan

When it comes time to sell your home and purchase a new one, many borrowers will find it is difficult to get the timing perfect for their new purchase. One main reason for this is because many borrowers actually find the home they want to buy before they sell the property they currently own. But what most of these people do not know is that lenders actually provide what is called a “bridge loan” for this type of situation. These are only meant to be short term loans and are also commonly referred to as “swing loans.”

Below are a few benefits that come along with this type of loan:

-Current equity can be used for a down payment on the new home. If a borrower does not have enough funds to pay for the down payment on the home they are wishing to purchase, a bridge loan will actually provide the borrower with cash from the equity they have built.

-This allows you to move out into a new place before you have sold your current property. Many borrowers end up finding a new home well before their home has been sold. Bridge loans provide the borrowers with enough funds to do so.

-These loans tend to get approved very quickly. Borrowers can close this type of loan very quickly and have their funds in a matter of weeks.

But even though there are great benefits that come along with a bridge loan, there are also some disadvantages as well. Because these loans are very short term mortgages (typically six months to two years) they will come with a much higher interest rate then a traditional mortgage. This loan only allows you to carry your existing mortgage  to their new home until they can secure permanent financing.