Finance Literacy

Many people have no clue what a bridge home loan is, or how it can help you get a new home before you may end up selling your old one. Most people don’t know about the huge fees that come with that home loan and it could really cause problems.

The key is to understand a bridge home loan, as well as pros and cons.

Bridge Home Loan 101

You’re interested in moving up in the world - selling your home, and getting another one. Or maybe you want to downsize your current home, and get something a bit smaller, or cheaper.

So you start looking and then talking about putting your home on the market, but then you find it. That perfect home. It’s got everything that you want, right size, great looking colors, a beautiful neighborhood and everything else that you really want. Best of all the price is just right and in your available range.

There is really just one problem. You haven’t sold your home yet and you need that money to buy the house that you really want. The seller isn’t just going to stand by until your home has sold and you really don’t want to wait for that perfect place again.

So you have an issue, clearly.

This is where a bridge home loan comes in. If you have enough equity built up on your current home, you can get the cash from that equity, and put it as a down payment on your newer house.

While this sounds great, and it can be, there are also some serious factors to consider that could be negative.

Bridge Home Loan Fees

As mentioned, there are a lot of fees associated with this type of home loan. Obviously, things that sound good usually have some type of catch.

The reason that few people get a bridge home loan is that the interest rates are normally much higher than your average loan, and the fees are definitely higher than you might expect. If you have the money to be able to pay off your bridge home loan quickly, though, it can save you a lot of time - and money.

You see, the more money you would be required to pay the longer it takes for the bridge home loan to be paid off. Even so, you can usually purchase the home of your dream for only a few thousand dollars, making this an option to consider.

In other words

A bridge home loan can help you a lot, and make your life a lot easier… and let you get that nice, new home before you thought you could. Talk with a financial advisor if you’re not sure, and see what your loan officer things about the possibility.