what is a bridge loan for homes

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A bridge loan in a typical residential real estate transaction is a loan used to tap equity in an existing home to use as a down payment to buy a new home. This type of mortgage, as the name implies, "bridges" the gap in time from the sale of the existing home and the purchase of the new home.

Traditional bridge loans are appropriately named, because they are designed to help people bridge the financial gap between one home and another. For example, if you buy a new home before selling your old one, you can borrow money with a bridge loan to help cover such things as dual mortgage payments, the down payment on your new home, closing.

Bridge Loans for Home Purchases. A bridge loan is a type of short-term loan offered by lenders that allows you to "bridge" the gap between the sale of your old residence and the long term.

What Is a Mortgage Bridge Loan? Time Frame. Bridge loans make the best financial sense when home sales are brisk. Types. Bridge loans differ according to costs, conditions and terms. Considerations. Calculate the real cost of a bridge loan before agreeing to the terms. warning. bridge loans may.

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Although the math behind bridge financing has been known to confuse more than a few home buyers, it’s a relatively simple equation. To determine the amount of a bridge loan, take the purchase.

A borrower may be able to secure better rates and terms by getting both the bridge loan and the long-term mortgage from the same lender.

Bridge loans are temporary loans that bridge the gap between the sales price of a new home and the homebuyer’s new mortgage in the event the buyer’s existing home hasn’t yet sold before closing. In other words, you’re effectively borrowing your down payment on the new home. A bridge loan is secured by your existing home.

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Bridge loans for consumers are usually mortgages backed by an existing home. Most bridge loans have terms of 12 months or less. The balance of the loan has to be paid off (as a balloon payment) at the end of the term. Most borrowers pay off the loan by using money from selling their existing home. How to take out a bridge loan