Benefits of Bridge Loans
When buying a home, one of the best things you can do to make a great offer is to use a bridge loan. A bridge loan allows you to buy a home while you are still living in it for a year or two. It may also allow you to pay off the mortgage before you sell the property. These loans are often much easier to qualify for than conventional mortgages. Here are some of the reasons why. Listed below are some of the main benefits of bridge loans.
If you want to buy a home, bridge loans can help you make a competitive offer with no sales contingency. In a seller's market, a buyer with a bridge loan is more likely to be accepted. The cost of packing and moving is a major factor, and you don't want to add even more financial costs to the process. If you can't afford to take out a conventional loan to purchase a new home, a bridge loan is a great option. You'll be able to put 20% down on the new home, eliminating the cost of PMI.
Another advantage to bridge loans is that you can use them as a down payment on your next home or to pay off your original mortgage on your current home. For example, let's say you're a married couple in West Michigan who needs a larger home. Your SEV is $200k and you owe $200,000 on your original mortgage. So, you could borrow up to 85% of your current home's value and pay off the rest with the bridge loan. You can click for more details here.
The biggest disadvantage to bridge loans is that they are more expensive than standard mortgages and require take-out financing. Unfortunately, there's no guarantee that this financing will be available. During the financial crisis, market capital dried up, making it harder for borrowers to obtain take-out financing. A delay in the conversion can lower your returns and even cause you to default on your current home. So, if you're looking to buy a new home, you should plan for a bridge loan if you need to move within a short period of time.
Regardless of whether you need a bridge loan to sell your current home, the benefits of a bridge loan are numerous. The first is that it gives you more time to find a new home. This is a great benefit if you're moving twice in the same year. If you're selling your current home, you'll only have a few weeks to find a new one. Therefore, a bridge loan can be the best way to avoid a stressful situation.
A bridge loan can be the right choice for you if you're in a situation where you need a new home quickly but can't sell your old one yet. It allows you to make an offer on a new home without any contingencies. A buyer can use a bridge loan to buy a new house while he or she sells the previous one. A buyer can also use a bridge loan to avoid paying PMI because it will give them a 20% down payment on the next home. Go here for portfolio loan rates.
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