Have you determined to stir into a different home? If you have, you are undoubtedly worried about selling your current house so that you can purchase the fresh one, right? Of course, most people are in that situation, as no one wants to be paying two mortgages at the same time, but sometimes the sale of the current home and the purchase of the fresh one don’t always coincide exactly. That is when mortgage bridge loans can come into play.
Mortgage bridge loans are short-term loans that are designed to permit you to get into your fresh home before it is sold to someone else even if your current home has not sold yet. Bridge loans pay off the mortgage on your current home, and any “leftover” money can be used as a down payment on your fresh wish house. In this way, it is not necessary to wait for your house to sell in order to get into your fresh home.
Generally speaking, bridge loans do not require payments for about the very first six months. After six months, if your old house is still on the market, you will have to begin making payments; sometimes those payments are interest only, as everyone knows you are not interested in building equity in that house. You are attempting to sell it, not use it as a home or an investment!
When your house does sell, the bridge loan is paid off and you take out more traditional financing on the home of your fantasies. Bridge loans can be especially useful for folks who indeed want or have to budge even if they are incapable to sell their old house. Examples of such times might be to be closer to an ailing relative who needs assistance or moving due to a job transfer. Of course, sometimes, you are just anxious to buy the house you want before someone else gets it very first.
Albeit a bridge loan may be just right for you and your present circumstances, there are some definite disadvantages to mortgage bridge loans, as well. Because they are short-term and a little risky, they tend to come with higher interest rates and fees that are not associated with more traditional mortgage loans. That means more money out of your pocket. Also, one common stipulation with most bridge loans is that you must use that same lending company to finance your fresh home, which might lock you into terms that are less favorable than they would be with a different lender.
As with any financial transaction, the actual closing costs, fees, interest rates, and terms for bridge loans can vary greatly from lender to lender; in fact, there are some lenders who do not suggest bridge loans at all. If you do find yourself in need of a gap-closer loan so that you can stir, it is very significant that you fully understand everything before you sign on the bottom line.