What is a bridge loan?

A bridge loan is a type of loan used by individuals when buying a new home before selling their old one. It is typically used in the state of Virginia. A bridge loan is a short-term loan with a higher interest rate than conventional mortgages. It bridges the gap between a home seller’s old home and the new home they are buying. It allows them to purchase the new home without having to wait until the old one is sold. Bridge loan payments are usually due back within 6 to 12 months, after which time the borrower can either pay it off or refinance into a standard mortgage. The amount of money borrowed is determined by the estimated value of the old property minus the amount owed plus the cost of the new property. Bridge loans are often secured by the equity of the home. This means that if the borrower is unable to repay the loan, the lender has the right to take ownership of the home. Furthermore, bridge loans can carry high interest rates, so borrowers should be confident in their ability to pay the loan back before taking one out. In conclusion, a bridge loan is a type of loan used by individuals when buying a new home before selling their old one. It is often secured by the equity of the home and carries higher interest rates than conventional mortgages. It allows individuals to purchase the new home without having to wait until their old one is sold.

Related FAQs

What is a home equity line of credit (HELOC)?
What is a bi-weekly or accelerated mortgage payment plan?
What is the difference between a fixed-rate and a variable-rate mortgage?
What are the differences between a lender and a mortgage servicer?
What is the difference between a fixed rate and an adjustable rate mortgage?
What is a good credit score for a mortgage?
How much of a down payment do I need for a mortgage?
What is the difference between pre-qualifying and pre-approval for a mortgage?
What is credit scoring and how does it affect my mortgage?
What is an escrow account?

What is a bridge loan?

Related FAQs

Related Blog Posts