Most people find bridge loans useful for funding a downpayment on a new house while still waiting for their old home to sell.
A bridge loan is a type of loan that is designed to bridge the gap between two more permanent kinds of loans. For instance, you need to relocate to a new home as soon as possible but you do not have an immediate source of funding for it. Either you haven’t sold your current home, or you are planning on selling it but the home you will be relocating to is offered at an incredibly high price. It is in these cases where bridge loans may come in handy to help you get into your new home before you are able to sell your old one.
What You Need to Know About Bridge Loans
Bridge loans are very risky both for borrowers and lenders. Because bridge loans are short-term loans, they also entail high interest rates and large regular payments. Every time the borrower is not able to pay, there are high penalties and fees that get added onto the debt. If this happens, the borrower may find himself in a financial position that was worse than what he started with. On the other hand, lenders also view most bridge loans as high risk loans. There is a very large tendency for borrowers not paying their loans because of the high interest and fees. They are not always assured that the borrowers can and will pay the debt in full.
In bridge loans, the problems that usually turn up are the terms and the cost. Bridge loans are designed to be short term, usually for a duration of about six months. These loans are also known to have high interest rates so you should not be surprised with interest rates going up to 15%.
Obtaining a Bridge Loan
Getting a bridge loan does not depend on your credit limit but on your properties or the real estate that you own. There are several free bridge loan calculators that are available online for you if you want to know how much a bridge loan can cost you. In these bridge loan calculators, you will be asked to fill in certain information such as purchase price, cash available, first mortgage interest rate, amount of first mortgage, second interest rate and other data. Once you submit all these information, you will then be presented with a result.
Bridge loan calculators are not always perfectly accurate. However, they are very useful as they can give you a good estimate or idea of the costs of getting a bridge loan.
You can try out many free online bridge loan calculators that will generally give fairly accurate results based on the data that you put in. You can also look for free online bridge loan calculators by using search engines using related keywords. There are also many online bridge loan calculators that can help you with your financial assessment and evaluation, such as first and second mortgage calculators.