When buying a new home, you often have to act fast. If you’ve found the perfect property but the sale for your current one hasn’t been completed, a bridge loan may be the best solution for you.  Bridge loans help you bridge the financial gap between the purchase date of your new property and the sale date of your current one. It’s a short-term loan that allows purchasers to use the equity of their current property to obtain funds for the new property until the sale of the current one closes.

How Bridge Loans Work

Bridge loans may seem confusing at first, but they are relatively simple and common within the real estate market. In most cases, you are required to have your down payment for the new property. You then obtain a bridge loan for the remainder of the purchase price based on the equity you have in your current property. Bridge loans typically last no more than 90 days, with a prime interest rate plus two per cent a day and additional administrative fees. The exact interest rate will vary from bank to bank. Some financial institutions don’t offer bridge loans, in which case private lenders are available to provide financing options, often with higher rates.

How to Qualify

In most cases, if you can qualify for a mortgage you’ll be able to qualify for a bridge loan, but your lender will want to check your credit and financial history before approving your bridge loan application.

Benefits of Bridge Loans

The most obvious benefit of bridge loans is that they help you to purchase a new property before the sale of your current one has been completed, allowing you to be more flexible and competitive as a buyer. Bridge loans can also save you some extra time so you don’t have to scramble to move between your current and future properties.

Bridge loans can help you smoothly transition from one home to the next. For more information on bridge loans and to find the bridge loan that is best for you, contact us at Team Levine for professional and high-quality mortgage services.