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

---

What Should You Do If Your Home Isn?t Selling?

It can be very frustrating to put your home on... Read More

How to Build Your Free House

What if you could "place an order" for the construction... Read More

The Value of Foreclosed Property

The discount on a foreclosed property is not as great... Read More

Avoid The Traps Of Finance

Most consumers are told where to get their mortgage because... Read More

Top Ten Suggestions for Selecting a Real Estate Agent

In order to find a real estate broker or agent... Read More

Four Reasons To Offer Seller Financing

An example of seller financing: Years ago I bought a... Read More

Homes in Chapel Hill

Chapel Hill is located right in the middle of North... Read More

Canal Front Homes in Venice

A bit about VeniceVenice, Florida was named by an early... Read More

Tax Free Exchanges: Watch out for the New Residence Rules

On October 22, 2004, President Bush signed tax legislation that... Read More

Real Estate Appraisal - Do It Yourself

For single family homes, there are two basic methods used... Read More

Buying a Vacation Home

You'd like to buy a vacation home, but you're not... Read More

Should You Buy Real Estate Now

I have been seeing the market on fire for a... Read More

If You Move Yourself

You'll want to take some items in your own car... Read More

How to Make a Home for Sale Flyer Using Marketing Psychology

Want to sell your home right away, for the highest... Read More

When is the Best Time to Move?

As Realtors, we are often asked, "When is the best... Read More

How to Price Your Property?

A house properly priced is half sold. But there are... Read More

Finding A Capable Agent To Meet Your Real Estate Needs

Whether you're a first-time buyer, selling your current home or... Read More

How To Find a Real Estate Agent

You may be of the opinion that you don't need... Read More

How to Find the Sweet Spot in Real Estate Investing

Psssssssssst, Want to know a great way to make FAST... Read More

Is An Old Home for You? ? The Pros

If you prefer a home that is unique and has... Read More

Your Home Equity Can Work for You

"Use your home's equity to pay off your debt. It's... Read More

Real Estate Investments

Real estate investments come through a variety of different options.... Read More

Property for Sale in Bulgaria - Emerging Property Markets 1

The latest investment property headline is this: Popular and well... Read More

How Long Your Mortgage Runs Determines How Much You Pay

The first thing most of us think about when the... Read More

Maximizing Curb Appeal and First Impressions to Sell your Home

We all know that a home or property of any... Read More

Free Tips That Will Dramatically Increase the Selling Value Of Your House (Part 1)

Did you know that it's a proven fact that a... Read More

How To Start Investing For Financial Independence, Part 2

Last week, we started a multi-part series about how to... Read More

Time Is A Major Real Estate Wealth Growth Tool, So Use IT And Watch Your...

In Real Estate "Time" is a Wealth Development ToolsReal estate... Read More

Be A Realtor With Curb Appeal

Are you a realtor with curb appeal or are you... 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

The Person With The Most Money Wins!

More money can mean better:- Health Care - Relaxing... Read More

Golf and Waterfront Living: Live, Play, Relax

With today's planned lifestyle communities, golf and boating enthusiasts have... Read More

Interior Design Secrets for Selling Houses

New concepts in Interior Design Psychology are helping home sellers... Read More