know the Risks and Benefits of Bridge Loans!
Matrix Mortgage Global – Risks and Benefits of Bridge Loans
When you are selling your home and moving to a new one, there are a lot of moving pieces. Unfortunately, no matter how hard you plan, those pieces don’t always come together perfectly at first. Imagine finding the ideal home that you want to buy when you still haven’t been able to sell your home. One solution to this conundrum is to apply for a bridge loan.
What is a bridge loan?
Just as the name suggests, a bridge loan bridges that financial gap you have between buying your new home and selling your old one. Essentially, what you are doing is borrowing your down payment.
This type of loan is secured by the equity in your current home. Lenders qualify people for bridge loans in a variety of ways. Some will look at credit scores while others look more at the big picture to see if the loan makes sense.
The pros and cons of bridge loans
Under the right circumstances, bridge loans can be a great solution for people moving from one home to the next, but there are some risks you need to be mindful of. The biggest risk, of course, is that your home may not sell as quickly as you hope it will. In the meantime, the bridge loan will accumulate interest.
If such a scenario would be too stressful for you, then you may want to consider selling your home first before buying a new one.
The main benefit of having a bridge loan is that you can buy your new home without restrictions. Oftentimes buyers will make what is called a contingent offer on a new home – that is they will say to the seller, “I will buy your home on the condition that mine sells.”
Such an offer, however, is at greater risk of being turned down by the seller – especially if it is a seller’s market. If a similar offer comes in without the contingent, that is the offer that is more likely to be accepted.
Another benefit of a bridge loan is that it may not require payments right away. You may be able to get the loan and then wait a few months before the first payment. In many cases, this timeframe is enough for the borrower’s home to sell.
If you are interested in learning more about bridge loans and discovering whether this solution is right for you, call Matrix Mortgage Global today at 1-877-597-2605.