Bridge Financing

Bridge financing or bridge loans are temporary short-term loans, used in most cases when an individual sells one home and purchases another home; both with different closing dates.  Different closing dates sometimes occur for a variety of reasons, including a desire by the purchaser to allow for renovations of the new purchased property.

Lender bridge loan financing rates vary from financial institution to financial institution.  Most lenders charge an administration fee and in most cases, additional legal fees are required as well.  Bridge financing is not extremely profitable for financial institutions, but nevertheless provide this service for clients.  In addition, there is always a possibility of one of the transactions, either the sale or the purchase not closing. 

Bridge financing is usually needed when borrowers and home owners upsize from a smaller home to a bigger more expensive home.  It is important to note that not all lenders offer bridge financing and only those that do offer bridge financing, will do so only if the borrower is approved for the first mortgage with the lender. 

Bridge loans are complex to understand.  Every situation is unique and every bank and lender handles mortgage transactions, including bridge loans with a different mindset.  Talk to experienced mortgage agents and mortgage brokers when contemplating selling one house to purchase a more expensive house which may require additional funds and may have different closing dates. 

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April 27, 2017

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