Understanding Bridge Loans
Using A Bridge Loan To Buy A Property
Are you a homeowner who has been thinking about selling your home and buying an upgraded home with the money from that sale? Although this is an exciting venture, sometimes this situation can cause financial strain because of the sale and purchase dates not being in alignment. Luckily, there are loan options available that can help out buyers who find themselves in this unique situation. A bridge loan can provide home financing to a borrower that is not yet able to access the expected money that their home sale may bring within the timeframe they need it when buying another property. If you are looking to buy a home in Palm Beach, Tri-County, or Broward County, Florida, CTC Mortgage is here to help. Read on to learn more about using a bridge loan to purchase a home.
Basic Information: Bridge Loans
Bridge loans are intended to help a home buyer obtain the financing for a property while they are simultaneously in the process of selling the property they currently own. A bridge loan is backed by collateral, meaning it involves an existing piece of real estate or business inventory to secure a loan. With a bridge loan, a borrower can utilize the home equity from their current property to help them afford the cost of a new purchase, (which can include the price of the down payment and closing costs). Borrowers will use the funding from the sale of their previously owned home to pay off the bridge loan, and these loan types are typically required to be paid back after one year. It is important to understand that a bridge loan will generally have a higher interest rate than a traditional loan, and there may be a chance that if a borrower has not yet paid off their initial mortgage amount on their first home, they may have to pay two monthly mortgage payments, both on the new home and the original home until that home has been officially sold.
The Advantages Of A Bridge Loan
Using a bridge loan to buy a property can offer several benefits to a homebuyer. First of all, a bridge loan can give you an advantage over other possible home buyers because this type of funding can be approved quickly, accelerating the transaction. Also, Bridge loans tend to make it more convenient for borrowers who need to relocate rapidly, and they offer flexibility in that a borrower can buy a different home while continuing to own another property. Some other benefits to a bridge loan are that they can help a borrower make a payment of twenty percent or higher, helping to avoid private mortgage insurance payments and they make it easier for a home seller to accept your offer since it won’t be dependent on the sale of another property.
If you are interested in using a bridge loan to facilitate the purchase of a property in Palm Beach, Tri-County, or Broward County, Florida, contact CTC Mortgage today for a consultation.
