For someone who has lived in their home for a long time and built up significant equity in it, but wants to move into a new home, a bridge loan can be an excellent choice to simplify the process of receiving a mortgage loan to finance the new property.
With a bridge loan, you can take equity out of your existing home -- up to 75% -- and use it on a downpayment for a new home. This acts as a non-contingent offer, being executed at the same time as the new mortgage, so that if you don’t wind up closing on the new home you aren’t stuck holding a ton of cash.
A bridge loan includes a stipulation that your old home goes on the market, and you do not make any payments on that old mortgage for 12 months, giving your home plenty of time to be sold such that the old mortgage can be paid off (though there is a ‘bloom rate’ at the end of those 12 months).
Bridge loans are a great choice for anyone who is looking for a new home and doesn’t want to potentially get stuck owing payments on two mortgages.
