Bridge Loan Fundamentals

A bridge loan sounds alike a loan which bridges the gap between the financing of home which has been purchase and sale of the current home. They are extensively used when the buyers home are not sold out and the equity from the sale is to be used as all part of the down payment on the current house. One of the advantages of this kind of loan is that the buyer has the freedom to make the offer which is not change on the sale of the current house.

However the interest rates are quite high than the general home loans but the bridge loan does not require remittance until the property is fully settled out or sold out. Home equity strings of credit or the home equity types of loans required very lowest monthly payments and could provide you with the fluctuating interest rates while the bridge loan rates are most of the time fixed.

They are often collateralized by and for the amount of the equity which is required by the borrower to pay off the mortgages until the sale are made on the original property. This also reduces the amount of interest paid on the loan although it puts some of the borrowers after the acceptable income to the debt ratio and could also put the borrowers in the risky financial situations in order to meet the monthly mortgage advance.

There is another option because bridge loan combines the current mortgage and equity by using the property as collateral. This also allows the borrowers to remove the monthly mortgage payment and postpone the payoff on the bridge loan unless the property has been sold. The borrowers could also move on for the new purchase without paying the old mortgage loan which is hanging over their head. And by the help of bridge loan the buyer could also put the market quickly with fewer restrictions.

Leave a Reply