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How Bridge Loans Help Buyers Over the Gap

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This entry was posted on 9/17/2006 7:36 PM and is filed under Loans.

Nobody wants to carry two mortgages on two homes at the same time. Sometimes, however, an overlap occurs between buying a new home and selling the old one. Here’s where a bridge (or "gap," or "swing") loan can take the pressure off the monthly budget and provide down payment money.

  • Take a short-term loan.A bridge loan is a short-term loan for which the equity in your old home (and sometimes in your new one) serves as collateral. Various lenders charge different interest rates – often 1 or 2 percentage points above the current prime rate, or a bit higher than the current regular mortgage rate. Depending on the lenders’ requirements (appraisal, title search, etc.), closing costs can be anywhere from 0.5% to 1.5% of the loan amount.
  • Pay off as you choose. You may pay the loan off when you sell your home, or in monthly or quarterly installments. If your home does not sell within the specified term (often 6 months or a year), the loan is usually renewable.
As real estate professionals, we have experience in all aspects of home purchasing. E-mail us to take advantage of our knowledge of the kinds of financial assistance that are available.

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