More and more people all over the world are using bridge loans to help finance the purchase of a new home
before they
have sold their old one, but without a bridge loan guide, it can be difficult to know what kind of loan
you need and how
to make sure you’re getting the best deal. These short-term loans make it possible to make an offer on a
new home
without having cash from the sale of your current home, and are a great option for many people.
How These Loans Help?
While most people are unable to afford a mortgage on two homes, with a bridge loan, you can easily buy
your new home
while you wait on your old one to sell. By taking out a loan based on the value of your primary
property, you can borrow
money based on the fact that you are going to sell it in the future. This money can then be used to pay
for a new home.
Once you have sold your old home you will be able to easily pay off the bridge loan.
What Terms to Expect?
Bridging loans typically have higher rates than normal mortgages do, as the lender is assuming more risk,
especially if
the primary home does not have a contract for sale yet. In addition to the interest that the borrower
has to pay, there
are generally fees that can add up quickly, making bridge loans more expensive than mortgages, but they
are a great
option if you need the money for a new home right now.
Are There Any Risks?
While bridging loans are a great way to finance the purchase of a new home, if you have problems selling
your old
home, you will have difficulty paying back the loan. For this reason, many lenders want their borrowers
to come up
with an exit plan of how they will pay back the loan should they be unable to sell their first home.
This is an
expensive way to finance a new home and should only be used if you are sure that you can pay it back and
are
confident that you will be able to sell your home.
As is obvious with this bridge loan guide, while this is a great way to be able to afford a new home, you
do have to
be careful when using a bridge loan to finance a purchase, as you do not want to end up with a loan that
you are
unable to pay back. Working with a great lender or broker is key, which is why at Donkey, we
offer help
to our customers.
