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Bridging Loan

Sometimes people get in the situation where they are looking to buy a new house so they put their own home on the market, which gets sold first, before they are able to close on their new house. While this sounds ideal, this is typically not the case, because you will usually have to close on your new home before the old one sells. The hard part is trying to figure out how to pay for both houses at the same time until you sell the old one. Bridging loans are like signature loans and are common so that you can take out a home equity line of credit to be able to bridge the gap between the sale of the new house and the old home, or you could also do cash out mortgage refinancing. 


You will need to apply for this type of loan to see if you will qualify, attaching it to an asset, such as a car or a recreational vehicle. You will need your down payment money to be seasoned so that your lender will see that you have a history, and getting a bridging loan may not provide that proof. In order to know if you fulfill the requirements, you will want to talk to a loan officer and they can explain the options and requirements more fully to you. 


In order to close a loan, you will typically need to have the down payment in full, which you might have been planning on using the money from the sale of the old home. There are two loans that can help you as bridging loans to cover the difference while you wait for your old house to sell and these are a mortgage refinance or a home equity line of credit. A bridging loan will possibly have a higher interest rate, but will be smaller compared to a full out mortgage, and will also help you to transition smoother into your new home. 


You will probably not qualify for a bridging loan if you need to get a bad credit mortgage, but otherwise it could be a great benefit to you if you are having a hard time selling your old home. After you sell the house and you are settled into the new one, be sure and pay off your bridging loan as soon as you can, providing it will not put you into any financial trouble.