If you’ve been considering taking out a loan while in the process of moving house, you’ve probably stumbled across the term “bridge loan” and wondered what exactly this means. A bridge loan, also called a hard money loan, is just a fancy name for a short-term loan to provide financing during a transitory period.
This article will explore the ins and outs of bridge loans so you can decide whether this is the right move for you financially.
How Does a Bridge Loan Work?
This type of loan is short-term and provides you, the borrower, with immediate cash flow until you can pay your existing obligation. For example, say you’re selling your home, but you need the money to purchase your new home in the meantime. This is when you’ll want to take out a bridge loan. So, you’ll use your current home as equity to buy you some more time and get you more money. Some people even use high-value assets like jewelry and fine art.
Residential bridge loans are typically written for around 11 months, while commercially they are written for at least 12 months to 2 years. Most people usually take out a bridge loan for an average of 6 months.
Cons of a Bridge Loan
Of course, there are some things you need to be aware of before taking out one of these loans. Typically, with a bridge loan, you’ll be paying higher interest rates than other loans. If you have a mortgage, you’ll still need to make monthly payments to that and the bridge loan, so this can really increase your monthly bills.
How To Qualify for a Bridge Loan?
So, you’ve done your research and can afford to take out a bridge loan, but how do you actually qualify for this loan? To successfully qualify for a bridge loan, you’re going to need a near-to-perfect credit score, which is about 700 or higher, with an appealing low debt-to-income ratio of at least 50%.
Get Loan Help From The Experts at Florida State Mortgage Group
Is a bridge loan the right move for you? The process of applying for loans and understanding the terms of the agreement can be a confusing task, so let Florida State Mortgage Group do the heavy lifting for you. If you’re ready to move forward with a loan, book your consultation today by giving us a call at (954) 359-3000.
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