If you are a homeowner who is looking to purchase a new home before you have sold your current home, you may be wondering what options are available to you. One option that may be available to you is a bridge loan mortgage. In this blog post, we will discuss what a bridge loan mortgage is and how it works. We will also provide some tips on how to qualify for a bridge loan mortgage and what to expect during the process.
What Is a Bridge Loan Mortgage Table of Contents
What Is a Bridge Loan Mortgage?
A bridge loan mortgage is a type of short-term financing that can be used to help you buy a new home before selling your old one. Bridge loans are typically available from banks and other financial institutions, and they can be a great way to get the financing you need to make a major purchase.
However, bridge loans come with some risks, so it's important to understand what you're getting into before signing on the dotted line. In this article, we'll give you a complete guide to bridge loan mortgages, including what they are, how they work, and what to watch out for.
What Are The Different Types of Bridge Loan Mortgages?
There are two main types of bridge loan mortgages: residential and commercial.
Residential bridge loans are typically taken out by homeowners who are looking to purchase a new home before they sell their old one.
Commercial bridge loans, on the other hand, are usually taken out by businesses who need short-term financing in order to purchase or renovate commercial property.
What Fees Come With Bridge Loan Mortgages?
Bridge loan mortgage fees can seem daunting at first, but it's important to remember that these fees go towards the cost of your new home. The three main fees associated with bridge loans are the appraisal fee, the origination fee, and the closing costs.
The appraisal fee is what you'll pay for your home to be appraised by a professional. This fee can range from $300 to $600 depending on the size and location of your home.
The origination fee is what you'll pay to have your loan processed and approved. This fee can range from 0.50% to one percent of your loan amount, so it's important to shop around for the best rate.
Finally, closing costs are what you'll pay to have your loan closed. These costs can include things like title insurance, appraisal fees, and loan origination fees. Closing costs can range from two percent to five percent of your loan amount, so it's important to get an estimate from your lender before you commit to a loan.
Bridge loans are a great option for those who are looking to buy a new home before they sell their old one. However, it's important to be aware of the fees associated with these loans before you apply. By understanding the fees, you can be sure that you're getting the best deal possible on your new home.
What Are The Benefits of Bridge Loan Mortgages?
Bridge loan mortgages can be an attractive option for borrowers because they offer a number of benefits. First, they can provide access to capital that might not otherwise be available. Second, they can be used to avoid incurring pre-payment penalties on existing mortgages. Finally, bridge loans can help borrowers save money by allowing them to take advantage of lower interest rates.
What Are Some Alternatives to Bridge Loan Mortgages?
If you're not interested in a bridge loan mortgage, there are a few alternatives that may better suit your needs. You could take out a home equity loan or line of credit, get a conventional mortgage, or rent out your current home while you wait to buy another.
Each option has its own set of pros and cons that you'll need to consider before making a decision. For example, with a home equity loan, you'll likely have to pay closing costs upfront. And with renting out your current home, you'll need to be comfortable with the idea of strangers living in what was once your personal space.
How Do I Apply for a Bridge Loan Mortgage?
You can apply for a bridge loan mortgage through a private lender, like a bank or credit union, or through the government. The application process is similar to that of a regular mortgage, but you may need to provide additional documentation about the property you're hoping to purchase. Once you've been approved for the loan, you'll typically have 60-90 days to complete the purchase.
Bridge loans can be an attractive option for homebuyers because they offer a shorter timeline and often have lower interest rates than traditional mortgages. However, it's important to remember that bridge loans are still loans, which means they come with all of the same risks and responsibilities.
Is a Bridging Loan the Same as a Mortgage?
The answer to this question is both yes and no. A bridge loan mortgage is a type of mortgage that allows you to borrow against the equity in your home. However, a bridging loan is not the same as a regular mortgage.
A bridge loan mortgage is typically used for a short-term financing need, such as when you are buying a new home before selling your old one. Bridge loans are usually interest-only loans, which means that you only have to pay the interest on the loan each month. You don’t have to make any principal payments until the end of the loan term.
One thing to keep in mind with a bridge loan mortgage is that it’s important to sell your old home before the end of the loan term. If you don’t, you could be stuck making two mortgage payments each month.
If you’re thinking about taking out a bridge loan mortgage, be sure to talk to a qualified lender to see if it’s the right option for you.
Do You Need a Deposit for a Bridge Loan?
The short answer is no. However, most lenders will require that you have a minimum of 20% equity in your current home. If you don't have enough equity, you may still be able to get a bridge loan, but you may end up paying more in interest.