bridge loan mortgage

Bridge loan mortgage Types

There are two types of bridge loans. The first pays off the mortgage on your current home and makes a down payment on the new one. This means that you pay the mortgage only on the new property, agreeing to repay the bridge loan when the old home sells.

The second type of bridge loan is more risky, allowing you to borrow against the equity of the current home to use for your down payment. The scary part is that while you're paying off a bridge loan, you're still responsible for the mortgage payments on both homes.

The bridge loan can provide that short-term financing for your new home. Although the loan typically requires interest-only payments, the rates and fees may be higher and carry significant pre-payment penalties.

Bridge Loan mortgage Tips

Do research before you plan on selling your home to see what the asking prices are, and how long homes are typically being listed before their ultimately sold. The market may be strong enough so that you don’t need a bridge loan.

If you think a bridge loan is right for you, try to work out a deal with one lender that provides your bridge loan and your long-term loan. Usually they’ll give you a better deal, and a safety net as opposed to going with two different banks or lenders.

Also keep in mind that there are other alternatives to a bridge loan such as financing down payments with your 401k, stocks, and other assets.