...The Bridge Loan

Another financing method for those homebuyers looking to move up the property ladder. Suppose you've been looking at homes in the area, almost haphazardly, without any serious motivation to buy any time soon, but then one day the misses (aka "The Boss"....aka "Your Wife") falls in love with this beautiful home. You like the home too, but there's one problem. You've got to sell your home to be able to buy this new home the wife demands.

So you call your mortgage broker to discuss your predicament and he tells you about this financing instrument called a "Bridge Loan".

Now according to Investopedia: A Bridge Loan is a A short term loan that is used until a person or company secures permanent financing or removes an existing obligation. This type of financing allows the user to meet current obligations by providing immediate cash flow. The loans are short-term (up to one year) with relatively high interest rates and are backed by some form of collateral such as real estate or inventory.

There are two types of Bridge Loans:

• A bridge loan that pays off the existing mortgage and gives the borrower money to make the down payment on the new loan. Typically, with this type of loan the borrower is not required to make monthly payments. When the first home sells the borrower pays off the bridge loan along with accrued interest. With this option, the borrower has only one monthly mortgage payment, the payment on the new home's mortgage. If it takes a long time to sell the home the bridge loan may require interest only payments at some point in time, typically after six months.

• A bridge loan that borrows against the equity in the first home to provide the down payment for the second. As with the first type of bridge loan, borrowers typically do not have to make monthly payments on the bridge loan, simply paying it off with accrued interest when the house sells. Unlike the first scenario, however, with this type of bridge loan the borrower must still make monthly payments on their first home's mortgage as well as monthly payments on the mortgage for the second home. This type of bridge loan is not for the faint of heart or financially strapped.

Bridge loans are not my advisable solution, but are a viable solution for some. The cost of a bridge loan is substantial in terms of fees and closing costs. The best deal on a bridge loan is usually going to be found through a lender who is providing both the bridge loan and the mortgage loan for the second home.

The most important thing is to fully understand any loan you are considering. I advise all my clients to speak in depth with a financing expert before they make a decision. I can provide excellent references to utilize should the need arise. Feel free to give me a call for suggestions of who you might talk to regarding your financing concerns.

Joe Harrison

Avalon Properties Group

Cell:912-230-4294

Office:912-280-0304

www.RealEstateofGlynn.com