Crossing the Gap from this Home to the Next: Bridge Loan

So you're thinking of getting into a bigger house. You call up the real estate agent and make an appointment to go see what the market has to offer. Then you find it, the perfect "move-up" home. It's everything you've ever wanted in a home unless your married, in which case it's everything your wife has ever wanted in a home.

You'd make an offer right then and there but realize you need to sell your old home before you can by this one. You haven't even put your old house on the market yet. What to do?

The real estate agent advises that you could make what's called a "contingent offer"; buying the new house is 'contingent' on you selling the old one.

"Oops", says the agent, "Your old home isn't even listed yet? You may have wanted to do that before we went house hunting. Your offer is a little too 'contingent' for most sellers?they probably won't take it."

But before you give up all hope of getting into the home you want, first consider a bridge loan.

A bridge loan is a form of second trust that is collateralized by your present home in a manner that allows the proceeds to be used for closing on a new house before the old house is sold.

A bridge loan "bridges" the gap between the two transactions and is often the difference between getting the house of your dreams and missing out entirely. Bridge loans can also be setup to completely pay off the old mortgage or to add the new mortgage to your current debt.

Usually people who take out a bridge loan will use the funds to pay off the old mortgage while putting the rest towards the new home's down payment, first deducting any closing costs and prepaid interest.

Typically, the loan is structured with a relatively short term, usually six months to a year, and hefty prepaid interest.

Because of the risk involved in making a loan on collateral with only possible future value (the future sale of the old house), most lenders charge high interest rates on their bridge loans. The borrower typically must begin making these payments after six months if the house still hasn't sold.

Most often, a bridge loan is used to pay off the existing mortgage, with the remainder (minus closing costs and prepaid interest) going toward the down payment on the new home. If after six months the old home has not sold, the borrower begins making interest-only payments on the loan. When the home eventually sells, the bridge loan is paid off; if the house sells with in six months, all unearned interests are credited to the borrower.

In a perfect world you would have your house on the market will potential buyers making offers before you make any offers yourself. However, because of fluctuating market conditions, getting the timing right can be difficult. If you're willing to pay the higher rates and fees that come with a bridge loan you can buy yourself some extra time.

While a bridge loan can get you the house you want when you want it, it can be a pricey option in the long run. If it's an option for you, it may be a better idea to borrow against assets such as stocks or your 401(k). This can save you a considerable amount of money.

Before you do anything talk to someone who has experience in the financing side of the real estate market. There are more options for borrowers every year and consequently the process gradually gets more complicated. It pays to take the time to understand what you're getting into.

About the Author
Cameron Brown is an internet marketer specializing in ranking automation. For information on how a bridge loan can benefit you, visit Security National Capital

In The News:


pen paper and inkwell


cat break through


Home Equity ? Don?t Spend It on Risky Investments

The housing market has exploded in the last five years,... Read More

Location, Location, Location

Location, location, location - known as the 3 most important... Read More

Dont be Tempted by We Buy Houses (Updated)

Do you want to sell your home right away? Don't... Read More

Real Estate Bubble: Sophisticated Musical Chairs?

The real estate bubble is a hot topic today; annual... Read More

Where is the Sophisticated Property Investor Putting his Money?

The Traditional FavouritesOver the last five to ten years, UK... Read More

Rental Properties: 10 Ways To Increase Income

What if you want better cash flow from your rental... Read More

Jacksonville Real Estate Listings

With over 30,000 residents, Jacksonville in central Arkansas is a... Read More

What To Expect From Your House Appraisal

Having your house appraised can be a scary step in... Read More

The Secret To Marketing Your FSBO Home For Sale

You're ready to put your home or land (house, townhouse,... Read More

Investing in the Baltic Tiger: What Has Estonia Got to Offer?

Estonia's reputation is growing within the property investment market. Rising... Read More

Staging Homes for Top-Dollar Sales

Wouldn't it be nice to have Roger Hazard's design team... Read More

Buying To Let Top Ten Tips

Buying to let is considered a serious investment and should... Read More

Buying a House in Scotland

Buying a house in Scotland is slightly different from buying... Read More

Real Estate Investing and Home Ownership

If you already own your home, you will probably make... Read More

Real Estate Lease Option Danger

Why are real estate investors having so much success offering... Read More

Vegas: The New Frontier

Unless you have been living in Siberia, you know that... Read More

How To Go About Selling Your Home On Your Own

In days of booming real estate, you would think that... Read More

What?s Your Style? A Guide to America?s Most Common Home Styles

Styles of houses vary across the country. From the New... Read More

Selling Your Property Without An Estate Agent

It is possible to save £1,000s selling your home privately... Read More

Practical Advice for Finding Irish Castles for Sale

Have you ever wondered what it would be like to... Read More

Real Estate Investing - The Marvel Of Home Depot And Lowes

Repairing a rental home (or your own home) use to... Read More

Virtual Agent? Online Real Estate

When preparing to sell a house, you should always consider... Read More

Investment Real Estate: An Inexpensive Way To Get Started

If you are considering getting involved in investment real estate,... Read More

Home Selling: How To Set The Right Asking Price

Many homes remain unsold for a long time because they're... Read More

Real Estate Tax Incentives

Lower Your TaxesTax incentives for real estate investors can often... Read More

Real Estate Business

Starting real estate business is not that simple. Multiple aspects... Read More

Credit Help: Buying Real Estate -- Not the Same as Buying Cars

Credit for Buying Real Estate is Different than Credit for... Read More

Questions To Ask The Landlord Before Renting His Apartment

Apartment hunting is not the easiest thing around. You may... Read More

Create a Sizzling Home Sales Flyer

Did you know that the sales flyer is the most... Read More

Moving On: Powerful Tips For Selling Your Home

Maybe you're moving to a larger home to accommodate a... Read More

How to increase the Saleable Value of your Home

When selling your home, you'll want to fetch the best... Read More

Dont Sell It Yourself

Don't sell it yourself! Sometimes a "FSBO," or house "for... Read More

Joint Ventures In Real Estate Development; So How Do They Work?

There are many reasons why you would consider joining with... Read More