With today's more mobile society, there's a need for a bridge mortgage loan. Families are moving more often, requiring more flexible terms for loans on homes. These types of loans are unique from just about every other mortgage loan because they are extended for only a short time, usually a year, and are designed for that period between putting a house up on the market and actually selling it.
Like everything else, there are pros and cons to using a bridge mortgage loan during the sale process.
Pros of a Bridge Mortgage Loan
The first positive thing about a bridge mortgage loan that can not be overlooked is how convenient it is to have a temporary loan set in place for the time in between selling your old home and buying a new one. Depending on the lender and how this type of mortgage loan is set up, you can choose to pay off the existing loan and the extra money after interest and closing costs can be used for a down payment on the new home.
Typically a bridge mortgage loan only lasts for a year and when you sell your home, the loan is automatically paid off. Another enticing aspect of bridge mortgage loans is that if you have not sold your home in 6 months, you have the option of making interest only payments on the house; in effect buying you more time to sell the old house.
Cons of a Bridge Mortgage Loan
Let's face it; no one really wants to deal with at least three mortgage loans in a short period of time. You will have your current home mortgage loan, the bridge mortgage loan, and the new house loan to contend with within the span of a year's time. Another feature some people would consider a drawback is that you must use the same lender for your new home mortgage as you did for the bridge mortgage loan.
This type of loan is not for everyone considering that bridge mortgage loans often come with higher mortgage fees and interest rates. For those who simply do not find it economic to handle the selling of their home in this manner, you can always consider borrowing against your 401K plans or liquidating other assets to get you and your family through the transition stage. Some people have also had success by taking out personal loans by securing the transaction with currently held stocks.
There are options out there for making your life easier during the selling and buying of your homes. Bridge mortgage loans are incredibly beneficial under the right set of circumstances.