Why would someone use a bridge real estate loan?
A bridge loan is a way for a homeowner to cover financing costs when selling a home or property and purchasing another. The bridge loan provides financing to buy a new property before the proceeds of the old property become available. Bridge loans can be risky if the sale of the old property falls through. A bridge loan is usually based on the amount of equity in the borrower s current property with the proceeds going towards the purchase of the new property. Bridge Mortgage Loan Structure Terms of a bridge loan can vary. Some bridge loans are structured so that they completely pay off the old property’s first mortgage, while other bridge loans pile the new debt on top of the old. A typical bridge loan might be structured as follows: The bridge loan is used to pay off the existing mortgage, and the remaining money from the bridge loan (minus closing costs and six months prepaid interest) is used as a down payment on the new property. If, after six months, the old property still is not
