December 06, 2001
By: Bev Dodd
Bridge loan: Rates and terms that you can afford
Terms of a bridge loan can very with each lender. If you think you might need a bridge loan because of time problems in moving, be sure to discuss this with your banker well in advance.
It's a good idea to place your home on the market as far in advance as possible of purchasing a new one. If you find a new home first and then try to sell your present home, you may wind up with two mortgages. If this does happen, ask your real estate agent or banker about a bridge loan to help you make the double payments. Lenders use the same criteria for offering bridge loans as they use for mortgages.
If you are going to sell your home yourself, consider hiring a professional real estate appraiser to provide you with an estimation of your homes present market value. Doing so will assist you in setting a fair and reasonable asking price; you don't want to have your home listed for sale longer than is necessary. If so a bridge loan might be the answer.
Terms of a bridge loan can vary. Some are structured so that they completely pay off the old home's first mortgage, while others pile the new debt on top of the old. A bridge loan is usually based on the amount of equity in the borrower's current home with the proceeds going towards the purchase of a new home.
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