Previous | Beware of cryptocurrency scams Next | How to save money at the grocery store
December 12, 2023 / Alicia Beecher
Is a bridge loan right for me?

Is a bridge loan right for me?

You’ve found the perfect home for your growing family, but there’s just one problem. You have to sell your current house first. Well, maybe not.

Bridge loans are a popular solution for homeowners who want to buy a new house before selling their current property. A borrower can use a portion of their bridge loan to pay off their current mortgage while using the rest as a down payment on a new home.

A bridge loan may be a good fit if you:

  • Have chosen a new home and are in a seller’s market in which houses sell quickly
  • Want to purchase a property but the seller won’t accept an offer contingent on the sale of your current home
  • 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
  • Aren’t scheduled to close on the sale of your current home before closing on the new houseGraphic of a man jumping over a dollar sign from one ledge to another.

A bridge loan is a form of short-term financing that offers an interest-only payment with just a 12-month
 term. It requires a borrower to pledge their current home or other assets as collateral to secure the debt – plus, the borrower must have at least 20% equity in that home. Bridge loans typically have interest rates that are higher than traditional, long-term financing options. In addition to paying interest on the bridge loan, borrowers must pay closing costs and additional legal and administrative fees that typically range from 1.5% to 3% of the total loan amount.

However, the application and underwriting process for bridge loans is generally faster than for traditional loans. Plus, if you can qualify for a mortgage to purchase a new home, you can probably qualify for a bridge loan – assuming you have the required equity in your first home. This makes bridge loans a popular option for homeowners who want quick access to funds to purchase a new house before they have sold their current property.

Bridge loans can be a great tool when you need funds but don’t yet have access to a long-term financing solution.

Alicia Beecher is consumer lending manager at F&M Trust.

Recent Articles
How to save money at the grocery store
How to save money at the grocery store

How to save money at the grocery store

June 19, 2024 / Lisa Hogue

Turning your hobby into a source of income
Turning your hobby into a source of income

Turning your hobby into a source of income

June 12, 2024 / Kia Treml

Is it time to sell your home?
Is it time to sell your home?

Is it time to sell your home?

June 05, 2024 / Katie Rittel

Seven tips to help you save for vacation
Seven tips to help you save for vacation

Seven tips to help you save for vacation

May 17, 2024 / Megan Witmer

Gig economy offers workers independence
Gig economy offers workers independence

Gig economy offers workers independence

May 14, 2024 / Shelby Yinger

Budgeting for home improvements
Budgeting for home improvements

Budgeting for home improvements

May 09, 2024 / Jenny Madden

What to know when starting a small business
What to know when starting a small business

What to know when starting a small business

May 06, 2024 / Natasha Koons

Tips for first-time credit card holders
Tips for first-time credit card holders

Tips for first-time credit card holders

April 23, 2024 / Chastity Wantz

What information do I need for my mortgage application?
What information do I need for my mortgage application?

What information do I need for my mortgage application?

April 17, 2024 / Mary Wright

Join our e-newsletter

Sign up for our e-newsletter to get new content each month.

NOTICE: YOU ARE LEAVING F&M TRUST!

You are now leaving the F&M Trust website. Links to third-party sites are provided for your convenience. Such sites are not within our control and may not follow the same privacy, security or accessibility standards as ours. F&M Trust neither endorses nor guarantees offerings of the third-party providers, nor is F&M Trust responsible for the security, content or availability of third-party sites, their partners or advertisers.