There are many factors that can impact a mortgage, and the process of becoming a new homeowner is challenging enough in its own right. That being said, what if this isn’t your first kick at the can, and you’re transitioning into a new home while trying to sell your previous one?
That’s where bridge financing comes into play.
This temporary loan — which typically only lasts for a few months — is an extremely valid financing option for those looking to bridge the gap between the initial sale of their previous home and the purchase of their new one.
To lock in this agreement with you and your broker, there must be firm proof that your previous home is not just on the market but that it also has a buyer and an offer. Once this is locked in, you can remove the worry about acquiring the home of your dreams and remove the lingering concern that your previous one hasn’t sold yet.
The major advantages of this process are:
- Successful home purchase prior to the sale of previous property
- Offers you more time to sell your previous property
- Gives you the opportunity to use the equity from your previous property for a new home purchase
- Provide funds for potential renovations for your new property
Some crucial information to take into account is that your bridge loan is separate from your mortgage proper, meaning that anything that would impede or improve your mortgage rates, will not impact your bridge loan.
While this may seem like a no-brainer for those transitioning between homes, there is one other crucial variable to consider, and that is that your bridge loan is only equal to the initial sale price of your first home and no greater.
With this simple set of parameters, you can now begin your journey on your bridge loan and journey to a new home.