Bridge loans and hard money lending are becoming more popular as mortgage guidelines continue to tighten for borrowers and the stock market is no longer a safe place for investors. These forms of alternative financing seem to be a win-win for all.
Bridge Loans
In a market where the time it will take for a home to sell is uncertain, some buyers making the choice to secure a bridge loan (also known as a swing loan or bridge financing). This type of a loan is designed to cover the gap between the time a buyer closes on their new home and the time in which their old house sells.
Bridge loans are typically one year in length. The loan is usually structured to pay off the buyer’s first home, minus closing costs and six months' of interest going toward the down payment for the new house. Occasionally a buyer may qualify for a loan that simply adds the cost of their new home to their current loan, but in this market this is rare.
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