If you’re a current homeowner, then you probably already know that moving to a new home can be costly—the down payment, closing costs, packing supplies, and moving expenses. It all can add up pretty fast.
It’s perfectly normal and even smart to be cautious about moving to a new home. If you’re uncertain whether you can afford the move, you may want to explore a bridge loan for a down payment.
Wondering exactly what a bridge loan means, how you can use it for a down payment, or how to go about obtaining one? Readon.
What Is a Bridge Loan?
The simplest definition of a bridge loan is a loan that buys you the time you need between ending your old mortgage and starting a new one so that you’re able to buy a new home.
If you’re a current homeowner, you may not be able to afford a 20 percentdown payment toward a new home unless you sell your existing home. If this is the case and you want to make an offer on a new home, you may have to include a clause that the offer is contingent on the sale of your existing home.
Problem is that contingency clauses are often unattractive to sellers. If they have multiple offers, then you may very likely wind up losing out on the home because of your contingency clause.
Likewise, selling your home too early can also present its own set of problems. If you sell your current home before you’ve found a new one, you may have to put your belongings in storage or find a temporary place to reside in the interim. Moving multiple times within a short period of time can be both expensive and inconvenient.
The good news is, a bridge loan may solve those problems.
How Can a Bridge Loan Help Get Me Into a New Home?
As a current homeowner, you have equity in your home. While you may not have thousands of dollars in the bank to go toward a down payment, you do have ownership of real property that you can borrow against temporarily.
A bridge loan allows you to access funds, using your current home as collateral so you can apply the money toward a down payment on a new home. It’s intended to be a temporary loan (typically lasting a year or less) that will be repaid once you’re able to sell your former house.
Securing a bridge loan can save you the hassle of worrying about how you’ll come up with a down payment for your new home or where you’re going to live between the sale of your old home and the closing of your new one. It also enables you to have more time so that you’re not in such a rush to sell.
Coordinating the timing ofthe closing of your new home with the sale of your old one can be incredibly difficult. With a bridge loan, you can wait for the right offer to come your way even after extending an offer on your new home.
Are There Risks With a Bridge Loan?
Worried about making payments on an extra loan? Typically, bridge loans allow you to make interest-only payments, allowing you to get settled into your new home without the worry of making full payments on multiple loans.
One thing you do have to take into account, however,is whether or not you’ll be able to sell your home within the year. If not, you may find yourself in that rush to sell that you wanted to avoid.
If you decide to hold onto your former home after the bridge loan ends, you’ll be responsible for paying the bridge loan in full or making loan payments that include principal and interest, depending on the lender. Before deciding whether to close on a bridge loan, you should think about whether you can afford to make two full mortgage payments at one time.
Some other factors to consider in deciding whether to take out a bridge loan are housing market conditions (for instance, if it is a seller’s market or buyer’s market) and whether your home is priced competitively.
Where Can I Apply for a Bridge Loan?
Bridge loans are only offered by select lenders. That means you’ll need to find a lender willing to extend you one and at the right terms. Solarity Credit Union, based in Washington State, offers bridge loan financing for a down payment.
Unlike some other lenders, Solarity offers financing up to 90 percent of the appraised value of your existing home, which means you’ll have more money to work with when making an offer. Their bridge loans also come with interest-only payments for 12 months and a 1-time convenient closing on both your bridge loan and new home.
Solarity can help save you time and energy by making the closing process quick and easy. With their great rates and flexible terms, you’ll also be able to save more money when you choose to close with them.
They know how important it is to love where you live and want to help you get there. They also want you to have a trusted lender by your side so you can close stress-free. That’s why Solarity works hard to make the transition from your former home to your new one as smooth as possible.
Ready to apply for a bridge loan or want to learn more? The dedicated Home Loan Guides at Solarity Credit Union will walk you through the process from start to finish. Just fill out their online form to talk with one of their experts.
They’ll be in touch to offer some guidance on what loan products might work best for your particular situation. Securing funds to buy a new home can be quick and easy when you’re working with an experienced team. You’ll be enjoying your new home in no time.