Bridge Loans - Temporary Financing to Bridge the Gap
At Crestico, we offer Bridge Loans—a short-term financing solution designed to help you bridge the gap between the sale of your current property and the purchase of a new one.
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What Is a Bridge Loan?
A bridge loan is a short-term financing solution designed to “bridge” the gap between the need for immediate cash and the availability of long-term financing. Typically used in real estate transactions, bridge loans are ideal for consumers who need to secure a new property while awaiting the sale of their current one. These loans generally last for up to one year and are often backed by collateral in the form of real estate.
How Bridge Loans Work
Bridge loans come in a few different structures, and the specifics depend on the lender. The two most common options include:
- Rolling Both Mortgages into One: The borrower consolidates both loans into a single larger loan, paying off the first mortgage balance and applying the second loan toward the down payment on the next property. This simplifies the process, eliminating the need to manage two separate loans.
- Holding Two Loans: The borrower takes out a second loan that covers the difference between their current mortgage balance and up to 80% of the property’s value. This second loan is used for the down payment on the new property, while the original mortgage remains intact until it can be paid off.
Frequently Asked Questions (FAQs)
What is a Bridge Loan and How Does It Work?
What Are the Different Types of Bridge Loans Available?
There are two primary ways to structure a bridge loan:
Consolidating Both Mortgages: This option allows you to combine both your current mortgage and the bridge loan into one larger loan, simplifying your payments. The balance of your first mortgage is paid off, and the bridge loan goes toward the down payment of your new property.
Holding Two Loans: In this structure, you keep your current mortgage intact and take out a second loan based on the equity of your current home. This loan is used to fund the down payment for your next property while your first mortgage remains in place.
How Long Does a Bridge Loan Last, and When Do I Have to Repay It?
Bridge loans are generally short-term, lasting up to one year. Repayment is expected when your long-term financing is in place or your current home sells. Depending on your lender, some bridge loans may require monthly interest payments, while others may be structured with a balloon payment at the end of the term.