Home Loan Tips
Also known as interim financing, gap financing, or swing loans, bridge loans bridge the gap during times when financing is needed but not yet available. Both individuals and companies use bridge loans, and lenders can customize these loans for many different situations.
Bridge loans can help homeowners purchase a new home while they wait for their current home to sell. Borrowers use the equity in their current home for the down payment on the purchase of a new home while they wait for their current home to sell. A bridge loan gives the homeowner some extra time and, more often than not, some peace of mind while they wait. However, these loans normally come at a higher interest rate than other credit facilities such as a home equity line of credit (HELOC).
Typically, lenders only offer real estate bridge loans to borrowers with excellent credit and low debt-to-income (DTI) ratios. Bridge loans roll the mortgages of two houses together, giving the buyer flexibility as they wait for their old house to sell. However, in most cases, lenders only offer real estate bridge loans worth 80% of the combined value of the two properties, meaning that the borrower must have significant home equity in the original property or ample cash savings on hand.
