Bridge Loans

A bridge loan is a short-term loan utilized by a debtor who has not sold their present residence, as a way to help them pay for a new residence. An individual who wants to get their house prior to having sold the old home may well wish to rely on a bridge loan. A bridge loan is a loan that borrows against equity in the primary residence to supply the down payment for the new residence. Home owners don't need to make payments monthly on the bridge loan, just paying it off with  interest once the residence is sold.

 

As the expression implies, these loans bridge the gap between periods when financing is necessary. This kind of loan are made use of by both individuals and businesses and may be custom-made for   scenarios. For an individual, bridge loans are common in the housing market. Because there can often be a time lag from the selling of one residence and the buying of another, the bridge loan gives a homeowner more overall flexibility.

 

 

One of the more widespread applications of bridge loan financing will be to quickly close on a purchase of real estate. As an example, an investor sees a commercial property he hopes to invest in that was poorly managed and in average condition. A financial institution may not lend on this type of building, therefore the potential buyer would likely find a bridge loan to be able to get, update and lease-up the real estate. Once the property has is pulling in income, the buyer can turn to a bank to switch the bridge loan with long term financing.

The reason why a bank would likely not finance the loan on the building is because the property is probably not in decent shape or the property might not be fully leased up. Because of the extra risk, an investor may well obtain a better price on the property which counters the higher expenses of bridge loan financing.

If you're concerned about financing your business, you're probably also concerned about how to process credit cards. For many new and/or small businesses finding a merchant processor to handle credit card processing is difficult, as many banks consider these businesses to be high-risk. In that case, turn to a private firm such as Paramount Payments to handle merchant credit card processing.
 

The purpose of a bridge loan is to bridge the gap in timing which many borrowers encounter. Since the financing markets are more limited, borrowers are discovering that standard financing is getting problematic to find. Individuals  with credit concerns could encounter challenges. Numerous issues may create roadblocks an investor must maneuver over. These may include raised regulation in the banking sector and private-label securitizations which never have completely rebounded. In these types of situations, bridge lenders can help ease the transition for borrowers.