A Bridge Loan is a short-term loan that helps bridge the gap between buying a new home and selling a previous one. It allows homeowners to purchase a new home before they have sold their current home, providing them with the flexibility they need to move into their new home without having to wait for the sale of their old one.
Types of Bridge Loans
The type of bridge loan borrower a needs depends on the circumstances of the transaction. In some instances, a home buyer may wish to remain in her current residence for a time after buying the new home. In other instances, the borrower may intend to sell her current home simultaneously with the purchase of the new home.
Benefits of Bridge Loans
Bridge loans offer a variety of benefits. Some bridge loans are designed to allow a borrower to stay in her current home for a while even after buying the new home. This might allow the buyer time to renovate the new home before moving in. Or perhaps the buyer has has a need to remain in the old home for a while, such as to allow a child to finish out the school year without having to move. Bridge loans also provide borrowing leverage. In most cases, bridge lenders do not “count” the debt of the current home against the borrower. This allows borrowers to buy a new home based on the mortgage payment of just the new home.
