What are Bridge Loans?

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What are Bridge Loans?
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• As the name suggests, bridge loans are temporary
  loans that help in bridging the gap in your
  finances.
• You may borrow money against your existing
  property and the new one. This type of financing
  is secured by a real estate asset and tends to
  have a floating rate and a relatively higher
  interest rate than permanent loans.
• The Size of the Loan
• Typically, the loan size is determined by adding
  the value of the new property to your current
  mortgage and then subtracting the value of your
  existing house.
• Youll be left with the end debt i.e. the
  principal of the entire loan. Please note that
  the end debt will determine your ability to repay
  the loan.
• The lender will use both properties as security.
  This means that youll have to cover both the
  existing debt as well as the cost of the new
  property until you sell your current house with
  one home loan called the peak debt.
• Once your property is sold, you can simply
  continue repaying the home loan with the added
  interest of the bridge loan on the new loan.
  Please note that the interest is compounded
  monthly. So, the longer it takes to sell the
  property, the higher the interest amount youll
  have to pay.
• Important Things to Consider
• You should keep the following things in mind when
  applying for a bridge loan.
• Make sure you have a realistic timeline for
  selling your existing property
• Have your property assessed professionally so
  that the selling price you set is realistic

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What Are the Advantages of Bridge Loans?

• Here are the top five advantages of bridge loans.
• Bridge loans are quick. You dont have to miss
  out on an opportunity just because the
  traditional lender (your bank) is slow on closing
  the deal.
• You dont have to wait until you sell your
  current property to buy your new home. A bridge
  loan will fill the financial gap.
• These loans allow you to buy out an investment
  partner who is no longer interested in the real
  estate partnership, setting you up for long-term
  benefits.
• There are no strict specifications for getting
  bridge loans as compared to conventional loans.
  It mainly depends on the judgment of the lender
  and your ability to repay the loan.
• You may get to enjoy the option of flexible
  payback. While youll likely have to give proof
  of a secure income source, you might be allowed
  to utilize an interest reserve given there is
  sufficient equity in the property for a larger
  loan.
• Bridge loans are indeed an easy and convenient
  option for buying a new home quickly while
  eliminating stress and frustration from the
  equation. To learn more about the right financing
  option for you, schedule a consultation
  appointment with an expert at Blake Mortgage!