Buyers typically take out bridge loans so they can buy another home before they sell their existing residence or build a new home. Bridge loans are secured by your existing home that “bridge” the gap between the sales price of anew and the homebuyer’s new mortgage in the event the buyer’s existing home hasn’t sold before closing. In other words, you’re borrowing your down payment on the new home using the equity in your existing home.
BENEFITS
- A buyer can buy or construct a new home and put the existing home on the market with no restrictions. This allow the buyer to move at their convenience or live in their existing home during the construction period.
- Many sellers won’t accept a contingent offer in a seller’s market so having a bridge loan can make your purchase offer more attractive.
DRAWBACKS
- A buyer must be qualified to own two homes at the same time. Hopefully the buyer will own two homes for a short period of time.