Everything You Need to Know About Bridge Loans

A bridge loan is almost like an actual bridge…just made of money, that’s all.

Bridge loans are one of those financial terms that people sometimes don’t understand. It’s like the umami of the investment property loan world. And that’s unfortunate because not knowing the meaning of a bridge loan may be preventing you from getting into the investment property business. So, instead of asking, “What is a bridge loan?”, let’s learn everything we can about the term so that you can ask instead, “How can I get a bridge loan NOW?”

Simply put, a bridge loan is just a sum of money lent by a bank or money lender to cover an interval between two transactions, typically the buying of one house and the selling of another. It’s short-term financing used until a person secures permanent financing or removes an existing obligation. Bridge loans are temporary loans secured by some type of asset, usually a home.

The bridge refers to the gap between one loan and the other when you don’t have any capital. For instance, you can place your home on the market, take out a bridge loan against the home, and use that bridge loan to pay the down payment on your new home. The bridge loan allows you to purchase your new home while you wait to sell your old one.

That’s why bridge loans are so popular (and so effective) in the real estate industry. Property investors can use bridge loans toward the purchase of a new home while they wait for their current home to sell. A bridge loan can also help you get a leg up over other buyers in a hot housing market. For example, if a seller is interested in a quick sale (because they always are), the seller may be more willing to make a good deal for a buyer who has the money to close quickly.

How do you know if you need a bridge loan? Typically, if you…

*are in a seller’s market in which houses sell quickly.

*can’t afford a down payment on the new property without first selling your current home.

*want to close on a new home before selling your current home.

*want to purchase a property but the seller won’t accept an offer contingent on the sale of your current home.

*aren’t scheduled to close on the sale of your current home before closing on the new house.

Then a bridge loan might be right for you!

Also known as interim financing, gap financing, or swing loans, bridge loans bridge the gap (hence the name) during times when financing is needed but not yet available. Bridge loans typically have a faster application, approval, and funding process than traditional loans. But despite this quick infusion of immediate cash, these loans normally come at a higher interest rate than conventional loans. And people who still haven’t paid off their mortgage end up having to make two payments—one for the bridge loan and for the mortgage until the old home is sold.

The big thing to remember when looking to apply for a bridge loan is to work with a bridge loan lender who you trust and who can make the entire bridge loan process as painless as possible. And The Loan Guys do just that, as they offer…

*one to two-year bridge loan programs

*620 minimum credit score

*purchase, refinance or cash out options

*75% Loan-to-value

*interest only payments

*rates starting at 7.49%

*no income verification, no w-2s, no tax returns required

*75k -2MM loan amounts

*no prepayment penalty So, now that we’ve figured out what a bridge loan is, what the hell is umami, anyways