Mortgage Bridge Loans Basics

Understand bridge loans before you secure one for your business

Bridge loans are a funding tool that businesses can use to purchase new properties before already owned properties are sold. These loans are intended to be short term loans and are considered a risky venture because they are made under the assumption that the property you are selling will in fact sell prior to the bridge loan maturity date.

Before you commit to a bridge loan, it is important that you understand the mortgage bridge loans basics. Consider the following suggestions to learn about these loans:

1. Know the intended purpose of bridge loans.

2. Understand the basic criteria for securing commercial bridge loans.

3. Explore alternative options prior to pursuing a commercial bridge loan.

 

Consider the purpose of a swing loan

A bridge loan allows you to purchase a new property before your existing property sells. These loans are short term loans, generally with a maturity date of 12 to 18 months. If your existing property isn't sold within that time frame, you will have to begin making interest only payments toward the bridge loan in addition to paying your regular mortgage payments.
Try: Target Woman offers an easy to understand description of a bridge loan. You can also find information on bridge loan repayment on this website. MortgageLoan.com offers bridge loan information, including the things to consider regarding swing loans and the benefits of bridge loans.

Know the basic criteria for a swing loan

Determining if you are eligible for a bridge loan involves finding out the regulations and standards for mortgage and bridge loans. For example, you should know that in most cases the company that will hold the mortgage on your new property can issue a bridge loan.
Try: Yahoo! Finance offers basic information about bridge loan financing. This website has numerous tools to help you find the best loan for your needs, including an article with information about what to look for when shopping for a mortgage and a mortgage calculator. You can find in depth information about mortgage bridge loans, including commercial bridge loan information, at Articles.DirectoryM.com.

Consider alternatives to bridge loans

For most lenders, commercial bridge loans may prove to be a costly option. These loans have higher than average interest rates and numerous fees. Because of this, it may be better for you to consider other financing options, such as a personal loan, borrowing from your 401(k) or selling stocks.
Try: You can find some information about bridge mortgages and some possible alternative places to find gap financing at RealEstateABC.com. BankRate.com offers an article that includes alternatives to bridge mortgages.

 

• Keep in mind that traditional mortgages and bridge loans both have closing costs and other fees. Because of this, your out of pocket expense can be considerable.

Copyright © 2011 Business.com, Inc. All Rights Reserved.

---