Many homeowners find it quite difficult to get the timing perfect when it comes to selling their current property and simultaneously purchasing other real estate. One main reason for this is because many borrowers often find the home they want to buy before they sell the property they currently own and most borrowers cannot find financing to help with their dilemmas. If your home is still on the market and you need cash now, please be aware that there possibly assistance available for you.
What most borrowers in this position do not know is that lenders may provide what is called a “bridge loan” for this type of situation. These are only meant to be short term loans and are commonly referred to as “swing loans.” These loans are available to both homeowners and businesses alike. Without them, many commercial and residential transactions would never take place.
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.
-The terms of these loans are usually very flexible. The loans term can range anywhere from a few weeks to a couple years depending on the borrowers situation. Also interest rates are sometimes negotiable and will vary depending on the estimated risk of the project.
-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 fast and have their funds in a matter of weeks.
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 the new home until you are able secure permanent financing. Lenders will evaluate the applicants situation to determine whether or not this loan will be suitable.