Bridge Loans Explained: What Are They and When Are They Used?
A bridge loanis ashort term financing solution meant to “bridge” the gap between other long-term options. At traditional financial institutions, the loan application process can literally take months, so bridge loans step in to cover urgent money needs in the meantime, generally for terms of six months to a year. Bridge loans are also called interim financing or gap financing.
Of course, with with San Diego hard money loans, setting approved quickly is rarely an issue despite past credit, mainly because hard money loans are leveraged by equity, such as physical possessions or property.
Reasons a Bridge Loan May Be Needed
In practice, bridge loans mainly apply to two situations:
• New home purchases:Homeowners looking to close on that perfect dream home may not have time to wait for their old home to sell before purchasing. They can request a bridge loan to close the deal in the meantime, andthen, when the previous home sells, they repay the bridge loan directly.Hard money refinance options are also a possibility.
• Business owners: Even large corporations need cash flow constantly. While they wait for long-term financing to process, bridge loans cover monthly obligations or material purchases.
Bridge Loan Tips
If you think a bridge loan may be the perfect fit for your immediate financial needs, here are a few tips to help:
• Read the terms: Trustworthy lenders don’t push you to accept shady terms. Real bridge loans are totally legitimate, and are only one of many options good lenders will present you with.
• Double-check purchase price: When using a bridge loan for a new home, make sure it covers closing costs, applicable taxes and fees from the loan itself.
• Save up for down payments: Avoid feeling the burn of two mortgages by covering the new home’s 10 or 20 percent down payment with money saved up well in advance, if possible.
If you need a hard money loan, contact a trustworthy hard money lender Los Angeles with a proven track record. Reputable companies should have an excellent Better Business Review and top marks from past lenders on sites like Google Review.
