What is a bridge loan?

One of the questions I've been running into more and more from homeowners today Is: “ Are there Bridge loans out there?” “What are they?”  “How do they work?” And it's interesting because for some of my older demographics they're very familiar with Bridge loans. Because they used to be around in the 70s and 80s and even early 90s. But really haven't existed much in the 2000s. and so in essence I wanted to go through what a bridge loan is and some of the benefits or downsides of utilizing one. So again one of the problems that I'm seeing with sellers is they're wanting to sell their home and go out and buy a new one. But the  inventory is very low here in San Diego County right now. And what that means is there's not a lot to choose from and they're not necessarily always liking all of the properties they see out there. And they're wondering how long is it going to take for me to find that next property? Also they have to sell their property or unlock the equity that they have in it in order to buy the new home. So what a bridge loan does is it steps in and what that allows you to do is keep and own your own home, go out and find the new property first on your timeline. And when you're ready and when you find something this bridge loan will allow you to buy the property based off of the equity you have in your current home. Once you get that loan, the bridge loans temporarily move into the new home you sell your old home. And when you unlock that Equity you roll over and refinance into permanent financing for the new home. 

Now there are some pros and cons to a bridge loan. The pros obviously is it gives you that luxury of taking as much time as you need to find that perfect property. And not worry about

selling yours and you know you have to find a temporary Home. The downside is sometimes they are higher interest rates, because it is a temporary loan and they're incurring some risk based on the premise that you still need to sell your property. But nonetheless it's been a great resource for many of our clients who are concerned about this low inventory and concerned about selling their home before they find the right property out there for themselves.

So if you want to hear more about these options and if they're right for you we have access directly to these lenders who are doing these Bridge loans today. Give us a call. We'd be happy to give you a consultation and walk you through the process.