Have you found a home that you want to buy, but the purchase largely depends on the sale of your current home? The seller may not be interested in waiting around until your sale is finalized, putting you in a tough situation. The solution to this problem is to get a bridge loan, which is a type of mortgage product that helps you get the money you need and manage your monthly payments.
What Is A Bridge Loan?
A bridge loan can be a short or long-term loan that is used to eliminate the problem of what happens when you sell your home after you buy a new one. In this situation where both homes are purchased with a traditional mortgage, homeowners typically have two mortgages that they have to handle at the same time. This can make it tough to make payments when your monthly mortgage payment has more than doubled.
When you use a bridge loan, you won't have to deal with two payments at once. You can buy a home as soon as possible, but take several months to sell your current home. Depending on how fast you think you can sell your home, you can get a short-term or long-term bridge loan to fit your needs.
Can Anyone Get A Bridge Loan?
It's important to look at the qualifications for a bridge loan to make sure that you fully qualify. This typically involves you having a certain amount of equity in your current home which will then be applied to your new home. If you haven't been in your current home for very long and don't have the cash on hand for a large down payment, you may not be able to use a bridge loan.
Are There Downsides To Using A Bridge Loan?
The main downside to using a bridge loan is that it can be slightly more expensive than if you bought and sold a home at the exact same time. A bridge loan is going to have a slightly higher interest rate and higher closing costs than a traditional mortgage because it is known for being a loan that will be paid off soon.
Of course, you must weigh the pros and cons of using a long-term bridge loan to determine if it's right for you. If you can't sell your home at the moment, it can be the best option for your unique living situation.