A mortgage bridge loan can be very helpful to people who are faced with the need to purchase a new property while they are in the process of selling their current home. Either they have yet to seriously put their home on the market or they unexpectedly found a new property that was too good to miss.
You could be someone who is looking to buy a home in the property market, one that has specific requirements for your family’s needs. You then found that perfect home that matches all your requirements but you have one stumbling block. You haven’t sold your current home and this seller asks to sell it immediately. This happens to many people who get caught up in such difficult situations. Fortunately there is an easy way how to secure the necessary financing. As the name implies a mortgage bridge loan helps to bridge the time lag between continuing making your current mortgage payments while giving you the financing for this perfect home that you’ve intentions to purchase.
An advantage of using such a loan is that it allows your present home to be used as collateral and you can use this loan to pay off your existing mortgage. It also provides you with new funds for the down payment on your new home. After you have completed the sale of your existing home, you use the money to liquidate your mortgage bridge loan.
Most people choose to obtain such a loan from the same lender who finances your new home. However one important fact is that it usually comes with a highly prepaid interest of usually 6 months interest payment. In the event that you are able to sell your current home before this time, you may receive back a certain portion of your interest payment. On the other hand if your home remains unsold then, you may continue to carry the burden of paying interest-only payment on your mortgage bridge loan.
The biggest drawback of getting a mortgage bridge loan is they are not your long-term solutions and have very short amortization period. It may have its benefits to help you find your dream home but you should be prepared for a few encounters of some of the less desirable aspects of such loans.