Bridge Loans
What Are Bridge Loans?
Bridge loans are sometimes called swing loans. This type
of loan helps with the difference that happens when you are
buying a new real estate property and have not sold your other
property yet. It allows you to use the equity that is expected
from the sell of the old property to be used as collateral
for the new property.
The amount of bridge loans are more than likely based on
the amount of the equity that is in the old property and the
proceeds usually will go toward the purchase of the new property.
Many people do not want to wait until their old property sells
in order to invest in new property. This is especially true
when you are talking about purchasing a new home.
Bridge loans are a way of getting an immediate, short term
loan until a more permanent loan will be put in place and
there is usually no prepayment penalties involved with these
types of loans.
As with all types of loans, bridge loans can vary. Some are
designed where the complete pay off of the old properties
mortgage is paid off first, while some others may add the
new properties debt to the top of the old properties payments.
Bridge loans could be used in this way: The bridge loan is
used to pay off the mortgage on the old property (the property
you are selling) with the money left the closing costs and
six months of interest will be used as a down payment on the
new property (the property you are buying).
If the old property has not sold after six months, you will
start paying interest on the loan. Bridge loans can be for
a time period of 90 days up to 24 months. When you sell the
old property the bridge loan is then paid off immediately.
If the old property sells before the first six months of the
bridge loan any unearned interest payments will be yours.
After, you sell the old property and the bridge loan has been
paid, you will need to finance the property. You can use the
same company that you used for the bridge loan.
Loan amounts and other options associated with bridge loans
vary among different lending companies. Bridge loans typically
are made in amounts that range from $100,000 to $50 million.
As with all loans.
In order to qualify for a bridge loan you will have to talk
with a lending company. Some of the things that will look
at before approving the loan are: * Your Credit – The most
important thing in applying for any type of loans is your
credit history. They will be looking at your past credit history
and how you repaid previous loans. * Collateral – A list of
your assets like: stocks or bonds, savings accounts, inventory
of the business, real property you own (home, other business,
etc.)
Be sure when you talk with different lending companies concerning
your options with bridge loans, be sure you have all of your
information together and that you know what you want. You
will be able to check out the interest rates and loan options
from different loan companies. Be sure you shop around as
each loan company may be different in the options they have
available.
Bridge loans can be used for many different financial investments;
some other ways that bridge loans are used today are for:
* Foreclosures
* Business Partner disputes
* Renovations or remodeling on your home or business
* Sale-Leasebacks
* Refinancing
* When a Balloon Note Due
* Resolutions for bankruptcy
* Restructure of debts
* Bank Workouts
* Mortgage Acquisitions
* Payoff of Tax Liens
* Payoff of judgments
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