Real estate agents, investors, home buyers and home sellers are always interested in utilizing smart home buying strategies.
A bridge loan is a type of creative financing that falls into the category of “smart home buying strategies”. It is a short term loan, 12 to 18 months only. It gets paid off with longer-term financing sometime in the near future, or from the sale of the property. As the name implies, it provides a bridge from one transaction to the next.
The Benefits:
#1. A Bridge loan is sometimes considered a cash purchase by Listing Agents.
#2. The Buyer does not need a contingency clause in the purchase offer of their new home.
#3. A home owner can buy a new house now and sell their present home later.
#4. There is no fear of losing their dream home because they have not sold their present home.
#5. Your buyer can buy a fixer, renovate it and have their dream home. Hard money bridge loans are often the solution for less than perfect properties.
#6. Speed. These loans can usually close in less than a week.
The Requirements:
- It must be a 12 month loan.
- There will be 3 months of guaranteed interest minimally.
- 20% down payment required on a purchase.
- On a refinance there must be lendable equity.
The Uses:
Typically, bridge loans are sought when another sale is pending and the funds are needed to close the final deal. At other times, a buyer may be in a “fire sale” situation, where the seller on the other end of the transaction must close a deal within a specified period of time.
Some instances when you might use a Bridge Loan are:
- Pulling some cash out of the equity in your current home to secure a down payment to purchase another home. This allows you more time to sell your present home.
- Refinancing the property you are selling to pay cash for the new home.
The Costs:
Rates and costs for Bridge Loans can vary by Lender. Rates range between *9-12% and are usually interest only. Rates depend on the amount of the down payment so the bigger the down, the lower the interest rate.
How We Can Help You:
We are licensed for the state of California and have been in business for 29 years.
Call our office at 707-523-2099 and within just a few minutes, we can let you know what we can do for you!
We hope this has helped you understand more about what a Bridge loan is and how we can be of assistance.
