An Introduction To Bridge Loans

Written by Robert

Bridge loans are a type of loan that are designed to provide temporary financing. These loans are commonly used when an individual is selling one property and buying another. Here are the basics of bridge loans and how they work.

Bridge Loans

Many individuals that are planning on purchasing a new home want to buy the new home before they can sell the other one. If their house is going to sit on the market for a few months, they want to go ahead and move into the existing house. One of the big problems that many people face in this area is coming up with the money for the down payment for the new house while they still own their existing house. This is where the bridge loan comes into play. The bridge loan will allow the homeowner to use their home as collateral and borrow enough money for the down payment on the new house.

It is important to have adequate knowledge about bridge loans so that you can plan your purchases accordingly because having funds is quite important in such matters and clearing the down payments is itself an arduous task so it is better to have credit cards at handy to manage borrowed debts, which you can learn more about through

How They Work

This type of loan is designed to be a short-term form of financing. In most cases, it is only going to last for a maximum of a year. Because lenders know that they are only going to be loaning money for a short period of time, they charge more for the interest. Bridge loan interest rates are typically quite a bit higher than what you can get with a traditional mortgage.

When to Use

A bridge loan should not be used in every situation. Most of the time, you will want to reserve the use of a bridge loan for special situations. For example, let’s say that you still own your house but you are looking for a house to move up to that is better than your existing home. You and your spouse have a vision of what your dream house is going to look like. One day you are driving around and you stumble across the house of your dreams. It happens to be on the market and you know that it is going to sell quickly. You do not have your house on the market yet or it has not sold yet. You know that if you wait, you will not be able to get a chance to purchase the house because it will be gone. In this case, using a bridge loan can be very beneficial. It would allow you to borrow money against the equity in your house in order to put a down payment down on the house of your dreams.

Another common situation in which bridge loans are used is when you have to move from one place to another. For example, you may have taken a job in another state. It came on suddenly and you have to move quickly. You want to buy a house in your new location, but you still on your existing house. You could get a bridge loan to help you make a home purchase in your new home state.

About the author


Robert loves the sea and dreams of getting a home with a beachfront. He used to be a Data Scientist in a multinational company but left his job to follow his passion for writing.