Residential Bridge Loans: A Possible Path to Your Dream Home

The opportunity to close on a dream home can be fraught with obstacles.

One of these obstacles may be when a homeowner finds their dream home but has not sold their current home due to scenarios outside their control.

This is where residential bridge loans may allow the homeowner to purchase a new home.

Residential bridge loans are short-term loans designed to provide homeowners with immediate access to funds to purchase a new home when their current home is still on the market. This loan product figuratively bridges the gap between the two transactions, offering homebuyers an opportunity to capitalize upon time-sensitive real estate opportunities without waiting for their current home to sell.

Unlike traditional mortgages, which may take weeks or months to finalize, residential bridge loans offer quick financing borrowers can access in a matter of days.

Residential bridge loans are typically short-term, with repayment plans ranging from a few weeks to one year. Once the homeowner sells the existing home, they will use the proceeds to satisfy the bridge loan.

Another option may be a collateral-based bridge loan. These loans are often secured (originated) against the borrower’s equity in their current home.

The equity acts as collateral and may lead to a more favorable rate and term.

Some bridge loans may allow interest-only payments during the loan term, reducing the immediate financial responsibility on homeowners until the sale of their current home is finalized.

Due to their expedited approval process and shorter terms, bridge loans usually carry higher interest rates compared to traditional conforming 30-year mortgages.

These types of loans embolden homeowners to act quickly if their dream home hits the market. By securing immediate financing, they can act quickly on real estate opportunities they may miss out on in a traditional mortgage process.

In a competitive real estate market, sellers may rather have buyers who don’t have to wait for their current home to sell, a bridge loan allows homeowners to present an attractive offer, increasing their chances of closing on their dream home.

Bridge loans can create a seamless transition from one home to another.

Some bridge loans offer flexible repayment options, providing a cushion for homeowners who may face cash flow issues during the transition period.

The pressure of coordinating the sale and purchase of two properties at once can be overwhelming. A bridge loan alleviates this stress, allowing homeowners to focus on each transaction separately.

Residential bridge loans serve as a valuable loan product for homeowners looking to take advantage of a hot real estate market.

They provide the opportunity to close on a dream home without the constraint of waiting for an existing home to sell. It is important to consider all risks carefully and calculate your ability to satisfy the bridge loan.

In conclusion, if you find yourself in a situation where your dream home pops up while your current home is still on the market, a residential bridge loan may be the loan product you desire.

Consult with a trusted mortgage advisor, such as myself, to explore the options available to you to own your dream home with confidence.