Glossary / Bridge Loan
A bridge loan is a short-term loan that is used to bridge the gap between the purchase of a new property and the sale of an existing property. It is typically used by homeowners who are looking to buy a new home before selling their current home. Bridge loans are often used when there is a time gap between the purchase of a new property and the sale of an existing property. This can be due to various reasons, such as delays in the sale process or the need for immediate funds to secure a new property. Bridge loans are typically secured by the existing property that is being sold. The loan amount is usually based on a percentage of the value of the existing property, and the interest rates are generally higher than traditional mortgage rates. Once the existing property is sold, the proceeds are used to repay the bridge loan. Bridge loans are usually short-term loans, with terms ranging from a few weeks to a few months. They are designed to provide temporary financing until the sale of the existing property is completed. Bridge loans can be a useful tool for homeowners who need immediate funds to purchase a new property but have not yet sold their existing property. However, they can also be risky, as they often come with higher interest rates and fees. It is important to carefully consider the terms and costs associated with a bridge loan before deciding to use one.