Bridge Loans Offer by Bridge Loan Lenders to Bridge the Gap…

A bridge loan is a loan that bridges the gap between the purchase of a new home and the sale of the buyer’s old home.  It is a temporary loan. I t is possible to do the same thing with a home equity line of credit.  However, lenders are reluctant to make a line of credit loan if the property is already up for sale.

A  bridge loan means that the buyer will initially have two home payments each month.  Some lenders will exclude the bridge loan payment in assessing debt.  Conforming lenders will be more likely to accept a higher debt to income ratio. Some bridge loans will require no payment for four months, but interest will accrue.

Getting a bridge loan means that the buyer of a new residence can put a home on the market and purchase the new home sooner.

Bridge loans have a higher interest rate, an administration fee that can be in the neighborhood of $750. appraisal and escrow fees, a title policy fee and recording fee. There is also a loan origination fee (points).

Getting a home equity loan, if possible, may be a better way to go.

There are also commercial bridge loans. This type generally has a six month to one year term and will have a higher interest rate than a permanent loan. These loans are often sought by individuals with properties that already have a mortgage, and the condition of property has restricted cash flow. The property may not qualify for a conventional loan.  The owner may apply for a bridge loan to rehab the property and acquire new lessees.

Many banks will make bridge loans if the borrower has excellent credit. If a rehabbing project seems uncertain of success, however, the borrower may have to borrow from a high-yield “opportunity” fund.  This type of fund specializes in bridge loans.

If the borrower’s credit rating is low and his expertise is not in the type of real estate he is seeking to finance, he may have to go to a hard money bridge lender.  This type of lender will lend on the equity in the property, but charge a higher rate of interest.

Disclaimer: The hard money loan calculators found on this website are offered only to estimate monthly loan payments. No guarantee is offered or implied as to their accuracy. Hard money loans are non conforming, they do not conform to the underwriting guidelines of Fannie Mae or Freddie Mac. Each private equity hard money lender has their own fee structures which may include points at closing and early prepayment penalties. Discuss all of the details of your particular hard money loan including all costs and fees with your selected hard money lender.

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