Between selling your home and buying a new one, there’s often a gap—and that’s where a private bridge mortgage can be a lifesaver. Let’s face it, managing the sale of your current home while purchasing your next one can feel like walking a tightrope, especially if the closing dates don’t align. It’s even more stressful when your lender won’t approve a traditional bridge loan due to the financial risks of carrying two homes. Luckily, a private bridge mortgage offers a flexible and practical solution, helping you secure the funds you need without the usual headaches.
In this blog, I’ve offered some insight into bridge mortgages and why a private one may be the best solution for you.
What Is a Bridge Mortgage?
When you’re buying a new home, chances are you’ll need the funds from selling your current property to cover the down payment. But what happens if your new home’s closing date is set before the sale of your existing home? This is where a bridge mortgage steps in.
A bridge mortgage is a short-term loan that allows you to use the equity in your current property as collateral to secure funds for your new home. Terms typically range from a few months up to a year, giving you the flexibility to manage both transactions.
Traditional vs. Private Bridge Mortgages
A traditional bridge mortgage through a bank usually requires a firm purchase agreement for your new home and a confirmed sale agreement for your current home. But what if your house hasn’t sold yet?
That’s where a private bridge mortgage can make all the difference. Unlike traditional loans, private lenders allow you to use both your existing home and the property you’re buying as collateral. This dual-security approach makes private lenders more willing to approve the loan, even without a confirmed sale of your current home.
How Do You Qualify For A Bridge Loan?
To secure a private bridge mortgage, you’ll need a copy of the purchase agreement for your new home and a copy of the sale agreement for your current property (if available). You will need a good credit score and a low debt-to-income ratio.
If your closing dates aren’t firm, private lenders can still provide the funds you need to complete your new purchase. This flexibility is particularly helpful if your home takes longer to sell in a slower real estate market.
Advantages of a Private Bridge Mortgage
Let’s take a look at some key benefits of choosing a private bridge mortgage:
- Flexibility: Private lenders often tailor their terms to meet unique borrower needs, unlike rigid traditional financing.
- Speed: Applications are processed quickly, giving you fast access to funds when timing is critical.
- Collateral Security: Using both properties as collateral provides reassurance to lenders and makes approval easier.
- Freedom to Negotiate: With funds secured, you can decline lowball offers for your current home without the stress of rushing a sale.
- Open Mortgage Terms: These allow you to avoid penalties if your home sells faster than expected.
Risks of a Bridge Mortgage Loan
Bridge mortgages can help ease financial strain, but they typically cover only up to 80% of your properties’ combined value, requiring significant equity or savings to fill the gap. They often come with higher interest rates, which can strain tight budgets, especially if market conditions lead to a lower sale price for your home. If your home sale falls through, you might face the challenge of managing two mortgages while interest on the bridge loan adds up. Additionally, defaulting on your mortgage during the bridge loan term could result in the lender taking possession of your property to recover their funds.
Why Work With a Mortgage Broker?
Understanding the complexities of bridge financing can be tricky, but working with a mortgage broker can simplify the process. A broker can connect you with private lenders who understand your unique circumstances and help you secure the best terms. They also provide valuable insights and contingency plans, ensuring your real estate transactions go smoothly.
Key Takeaways
- Bridge Mortgages Are Lifesavers: They enable you to move into your new home without waiting for the sale of your old one.
- Private Lenders Offer Flexibility: When traditional banks fall short, private lenders step in with tailored solutions.
- Planning Is Essential: Working with a mortgage broker ensures you’re prepared for unexpected delays or complications.
Does a Private Bridge Mortgage Sound Like The Right Solution For You? Call Me And I’ll Find The Perfect Lender
By securing a private bridge mortgage and partnering with a mortgage broker, you’ll have the flexibility to transition between homes without the stress of tight timelines. This financial tool is a game-changer for homeowners, helping you close the deal on your dream home while maximizing the value of your current one.
If you’re caught in this home buying and selling gap, give me a call. I’ll find you a private bridge mortgage that will work to your advantage. Book a free consultation or give me a call at 705-315-0516 today and let’s get you moving into that new home.