What Is Bridge Financing?Admin
To put it simply, you won’t stay in your first home forever. Sooner or later you’ll set it and most likely buy a new one. When you do, you’ll probably want to use the home equity of your current home and put it towards your new purchase. However, you might find that your new home will close before your sold home does, which will put you in a situation without a down payment. This is where Bridge Financing comes in. 20 to 30 percent of homeowners use this option when buying a new home.
Which Lenders Offer Bridge Financing?
Since these types of loans are so common bank definitely offer this option to borrowers. If you’re using a mortgage broker they deal with hundreds, sometimes thousands of different lenders, so it’s likely they have many that can offer it to you as well.
Here at Mortgage Alliance, we work with bridge financing lenders, so that’s why we’re able to offer this amazing mortgage solution.
How Much Can I Borrow & What Is The Payback Term?
With bridge financing, you can borrow up to $200,000 for 4 months. However, your lender can also evaluate your personal situation if you require a larger amount for payback term such as registering a lien on your property. This would involve some legal fees, so also be prepared for this expense.
Calculating Bridge Financing
If your current home closes in 90 days, but your new home closes in 35, then bridge financing does just that – it bridges the gap. Therefore, this loan will cover your home equity for the gap period of 55 days.
Similar to other loans, bridge financing also comes with additional fees, such as:
- A small amount of interest
- A flat rate admin fee
- Legal fees to remove the lien – only if you need a loan larger than $200,000 or require it more for more than 120 days.
Qualifying for Bridge Financing
In order to qualify for bridge financing you just need to provide:
- A copy of your sales agreement (current home)
- The purchase agreement (new home)