How exactly does a bridge loan work?
My husband and I found a house that we really want. We are trying to sell ours right now for 65,000, leaving 32,000 that we still owe on ours. A family member has offered to give us $20,000, agreeing that will will pay them back as soon as we sell ours. Question is, how would this money be beneficial in a bridge loan and how exactly do they work?
Tags: bridge, Exactly, loan, Work
a bridge loan is a short term loan used to “bridge” you for a short period of time.
They are common when someone tries to buy a home before selling existing home. A ‘bridge” loan is used to buy new home and must be repaid when your existing home sells. Sounds like family member is offering $20,000 bridge loan.
Sell your current home first. There is no reason to take on added risk of 2 mortgage loans in this market.
I’m having trouble following your math.
I think you are saying, you believe you have $33k in equity and could use that as a down payment on a new house if only you could sell the current one.
The family member is offering to loan you $20K to go ahead and buy/move on the condition that you pay interest and pay a balloon payment when the house sells.
If that’s the case, the bank loaning you the money to buy the new house has to believe that you can in fact sell the first house for $65K.
Right now, that’s not a guarantee.
A bridge loan is designed to give you the time needed to either sell your property or to get more typical financing. If you and your husband were to get a bridge loan from your family member, it would have a higher interest rate because of the risk of you not selling your house. You would make either no payments, or just interest payments, until the loan comes due/you sell your house.
Of course, if your family member isn’t going to charge you interest, and they are only going to bother you for their money when you sell your house, then it really isn’t a bridge loan.