When you are looking to purchase a new home, but you haven’t sold your existing home, then a bridge loan may be needed and might be a great option for you. Of course, just like with any financial decision, there are some risks. It is best to only consider this option when you know your home will for sure sale in the near future. One advantage to going this route is that you could be able to avoid a contingent offer and to make the offer more attractive.
Another advantage is that these types of loans come with more benefits compared to a home equity loan. But also keep in mind that they are also often more expensive too. If you want to immediately buy a home while putting your current home on the market, then it would be beneficial to pay the extra expenses, especially since sometimes these loans do not always require any monthly payments for the first few months.
Since a bridge loan is more expensive, be prepared for paying for costly fees. Just like with any other loan, interest rates are going to vary depending on the lender and depending on your financial history among other factors. And the interest rate also might fluctuate time to time due to the economy, but usually the average interest rate is around 8.5 percent with these types of loans. You could also be approved to not have to make payments for the first few months, but keep in mind that the interest will still build up.
Even though you may not have to make monthly payments right away, your interest will still accrue and be prepared for paying for some other fees. The administration fee is going to be your highest fee, on average around $850. The feels will go down from there, but expect to pay around $500 each for an appraisal fee, escrow fee and title policy fee. A notary fee, recording free and wire free all will be under $100 each.
Obviously, all of the hefty fees can add up. This is why a bridge loan will cost more than a home equity loan. On top of the extra fees, it also may cause some stress knowing that you have not only two mortgage payments now, but you will be accruing interest over the months that you are not making payments. Make sure to keep all of that in mind because these types of loans may seem like a good idea, but they are not idea for everyone.
Level 4 Funding LLC Private Hard Money Lender
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis@level4funding.com NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave |Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 42 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.