How to Get a Bridge Loan

Financing a new home can be tricky, especially if you've found your dream home but haven't sold the old one yet. If this happens, talk to your lender about getting a bridge loan. These short term loans can be a simple and economical way to utilize your existing home's equity while you're waiting for it to sell. But as with any mortgage transaction, ask questions and make sure you understand the terms and conditions.

Instructions

1. Talk to your mortgage lender to see if you qualify for a bridge loan. Knowing up front about the feasibility of obtaining the temporary financing will help you decide whether to proceed with purchasing the new home or not.

2. Shop around for the best rates and terms. Bridge loans are considered temporary financing so don't expect rates to be as low as those offered on long term financing. However, they do vary from one lender to another to it pays to do your homework.

3. Apply for your bridge loan at the same time you apply for your primary mortgage loan on your new home. If you can bundle the two loans together with the same lender, you may save some money on closing costs.

4. Choose terms for your bridge loan that you know you can live with if your house is on the market longer than anticipated. Don't assume it will sell in 3 or 4 months as it could take much longer. Interest only or delayed payment terms are common for bridge loans, but only temporarily. Eventually, some principle will be due so make sure you can swing the payments in a worse case scenario.

5. Work proactively to get your home sold and your bridge loan paid in full. Typically when your home is sold, proceeds from the sale go to payoff any mortgages on the property so selling your home quickly is the key to getting out from under the possible monthly payments of the bridge loan.