Bridge Financing a Mortgage

Overview

What is Bridge Financing?

A bridge loan is a short-term loan, typically taken out for a period of between 2 weeks to 3 years. This is interim financing for an individual or business until permanent financing or the next stage of financing is obtained. 

Bridge financing a mortgage is often used for commercial real estate purchases to quickly close on a property. This loan is typically paid back when the property is sold.

Following the credit crunch of 2008, fewer banks are willing to provide mortgage funding. This has created a greater demand for bridge loans. More individuals all over the world have found that getting a home equity loan may be more challenging.

These are temporary loans that bridge the gap between the sales price of a new home and a home buyers’ new mortgage in the event that the buyer’s home has not yet sold. It provides temporary relief for individuals who may want to buy a new home. Once your old home sells, you can use the proceeds to pay the bridge loan off.

Secured to the buyer’s existing home, this type of loan is typically more expensive than conventional financing, in order to compensate for the additional risk.

What are the benefits of Bridge Financing a Mortgage?

• The buyer can immediately put the home on the market without restrictions
• The loan may not require monthly payments for a few months
• It may be very helpful if you are a borrower looking to upgrade to a bigger home and you have not yet sold your current home
• Rates will vary among lenders, so chances are that you will be able to get the benefit of a personalised solution
• The loan can also be arranged relatively quickly, saving you valuable time and money