Bridge Loans - Buy Before You Sell

Real Estate

Bridge Loans - You Can Buy Your Next Home Before You Sell Your Current One!

When you want to buy a home and move from your present one, a bridge loan can be right for you. There are always costs associated with getting a loan, but let's look at it from a home buyer's point of view. First, your offer on a new home with a contingency to sell your current home is a weak offer in our Front Range market. If there are other bidders, you will need to offer a higher price to make your offer stand out and get accepted. Next, waiting to sell your house to buy another one can leave you with having to find a temporary place to live. Rents are high and short term rentals are even higher! This can cost more than the bridge loan fees. Also, moving twice is expensive and takes time. Finally, let's say that you do get a bid accepted with a contingency and you don't sell your home in time to close on your next one. You would need to terminate the contract and you've gotten nowhere.

So, let's take a look at bridge loans. A “bridge loan” is a short term loan taken out by a borrower against their current property to finance the purchase of a new property.

Also known as a swing loan, gap financing, or interim financing, a bridge loan is typically good for a six month period, but can extend up to 12 months. Most bridge loans carry an interest rate roughly 2% above the average fixed rate product and come with closing costs.

Bridge loans are generally taken out when a borrower is looking to upgrade to a bigger home, and haven’t yet sold their current home. A bridge loan essentially “bridges the gap” between the time the old property is sold and the new property is purchased.

Not every lender does bridge loans. Shoot me a quick message for a list of who does them!