Bridge loans are meant to be temporary loans and they are generally secured by some existing home or other property which you own. These loans bridge the gap between the sales price of your new home and the sales price of your old home, assuming that it has not sold in time for you to use the proceeds on the new home.
Basically, this amounts to borrowing money for use as a down payment on your new home, while you’re waiting for the old home to be sold so that you can make use of those funds. Apart from the obvious, there are several other benefits provided by a bridge loan, some of which you may not have considered before.
Bridge Loan Benefits
When you use a bridge loan in any real estate transaction, that means you will be able to use the equity built up in your current home in order to put a down payment on the home you intend to buy, without having to wait for the old one to sell. If the timing works out to your advantage, it’s possible that no monthly payments will be due on the bridge loan for several months, and that will leave you with a great deal of flexibility. In some cases, you may be able to repay the bridge loan when you have adequate cash flow, and that relieves all the financial stress involved in the entire transaction.
When you set up a bridge loan, the buyer will have the option of removing the contingency to sell, while still moving forward with purchase of the new home. This assumes that the buyer has made a contingent offer to purchase the new home, and that the seller has issued a notice to perform. None of these possibilities would be an option for the homeowner without having a bridge loan in effect, and it would require the homeowner to wait the entire time until the existing home is sold to a new purchaser.
Looking for a Bridge Loan?
If your small business is in need of a bridge loan pending the sale of some asset, we may be able to help you. Contact us at Emerald Valley Financial Services, so we can discuss some options which may provide you with the capital you need.