A bridge loan, also known as gap financing, is a loan intended to bridge the gap during times when financing is needed during a transitionary period. For example, moving from one house to another but not wanting a simultaneous closing. During the transition, you can apply for a bridge loan to help finance the gap.
- A short-term loan intended to bridge the gap during times when financing is needed during a transitionary period. For example, moving from one house to another and not closing simultaneously.
- Up to a 12-month term with your rate locked in for the duration of the loan. Monthly payment is interest only.
- Full repayment of the loan when home is sold, or other assets become available.
How does a bridge loan work?
A bridge loan helps you fund your next home purchase if the equity you are intending to use in the long-term isn’t available. For up to 12-months, a bridge loan can assist with the down payment on your next home. Although terms may vary, it’s standard to borrow up to 80% of your home’s value.
How to repay a bridge loan?
During the time of the loan, the monthly payment is interest only at a fixed rate for the term of the loan. When you’ve sold the property, the equity from the sale will be used to pay off the bridge loan. There is a maturity date for when the loan needs to be paid back in full but if funds are received prior to, the loan can be repaid at any time.
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