June 5, 2018
There are plenty of different types of loans available to you when you need the cash for a big purchase. Bridge loans, otherwise known as interim financing or “swing loans”, exist to help bridge the gap between the time financing is needed and the time financing becomes available. These loans are easily customizable to be used in varying situations depending on the individual’s needs.
Quick Facts About Bridge Loans:
- Bridge loans are considered short-term loans.
- Loans are used until permanent financing can be secured, or until an existing obligation is removed.
- Loan terms do not often exceed one year.
- Interest rates for these types of loans are relatively high.
- Bridge loans are commonly backed by a form of collateral, like inventory or real estate.
- These loans aren’t a substitute for your new home’s mortgage.
Who Can Benefit From a Bridge Loan?
The most common reason homeowners apply for bridge loans are because they are trying to buy a new home and sell their current home at the same time. You are essentially purchasing new property using the home you are selling as collateral.
Perhaps you’ve found your dream home but haven’t accepted an offer for your current home. Or maybe you had to suddenly relocate for work, forcing you to buy a new home before your current home is even on the market. A bridge loan “bridges” the gap between purchasing and selling.
Qualifying for a loan on a new home can be very difficult if you are still carrying the weight of your current mortgage. Bridge loans allow for a simpler and less stressful transition between mortgages. These loans are most beneficial to homeowners with properties situated in a seller’s market, since those homes are expected to sell more quickly than those in a buyer’s market.
Qualifying for a Bridge Loan
The high interest rates that accompany these short-term loans are sometimes enough to turn homeowners away. To qualify for a bridge loan, you usually need the following:
- A high credit rating
- Low debt-to-income ratio
- A significant amount of equity in your current property OR
- A significant amount of cash savings
But don’t dismiss your eligibility for a bridge loan! The professionals at Maryland Private Mortgage are here to help homeowners find a way to get the cash they need when faced with a time gap between buying and selling their homes. For more information on Maryland bridge loans or related Maryland hard money loans, contact us today!
The Maryland Private Mortgage Lending Team