(707) 401-8080
Bridge Loans – How To Use Them
The most common use of a bridge loan is when you don’t have the money to buy a property until another property is sold but you don’t want to wait. Often, it is because the seller won’t wait or you don’t want to take a chance on missing out on that property.

Bridge loans are designed specifically to help you through this sort of problem by providing short term financing so you can buy the property now and handle the long-term solution later.

There are three ways to do a bridge loan.

The first is to get a loan on the property being purchased. This is the least common one but can still be beneficial when it is needed.

The second is to get a loan on the property being sold. This is commonly done when there is a small lien  or no lien at all on the property already owned. Often, this type of bridge loan is done when the buyer is downsizing or buying a less expensive property.

It is sometimes done when there isn’t enough money to buy the new property for cash but there will be enough after the first property is sold. Or, it can be done when the buyer can’t qualify for loans on two properties at once. After the first property is sold, a new loan can be gotten on the new property.

The third way of doing a bridge loan is the most common. It is where the loan is secured by both the property that is already owned and by the one that is being purchased. In this case, it is important to fully understand how things will work when the first property is sold.

If there will be enough money from the sale to pay off the loan, there is no problem and there are no complications. But what if the property being sold will produce $400,000 and the loan amount is $500,000.

In this case, it should be arranged ahead of time (in the loan documents) that when the first property is sold, it can be released as collateral for the loan by paying down a portion of the loan.

This puts you in position to do things in the proper order and to not have to be stressed out about getting two transactions to close on the same day (the sale of one property and a new loan on another).

After all, a bridge loan is supposed to help reduce stress, not create more of it.

 

1 Step 1
Send us a message
reCaptcha v3
keyboard_arrow_leftPrevious
Nextkeyboard_arrow_right
FormCraft - WordPress form builder

Contact

Phone

(707) 401-8080

Address

14-C Healdsburg Ave Healdsburg, CA 95448