Bridge loans can be obtained from many lenders, including banks, credit unions and other financial institutions. However, it’s most common for your current mortgage provider to be the originating source for these programs. If you’re interested in pursuing a bridge loan, your lender should be your first port of call.
Considering this, are bridge loan A Good Investment?
Bridge Loans and other hard money loans can be safe, reliable investments when properly vetted and executed. These loans have been offered by mortgage brokerages and even some banks for years, but now it is easier than ever for individuals to “be the bank” and enjoy the benefits of helping qualified borrowers.
Moreover, do I qualify for a bridge loan?
To qualify for the bridging loan, you need 20% of the peak debt or $187,000 in cash or equity. You have $300,000 available in equity in your existing property so, in this example, you have enough to cover the 20% deposit to meet the requirements of the bridging loan.
How do you avoid a bridge loan?
A home equity loan is one option to avoid a bridge loan. Interest rates on home equity loans are lower than bridge loans, and if you already have a home equity line of credit available, the funds are at the ready.
On an owner-occupied hard money bridge loan, the approval and funding process should take 2-3 weeks. The same type of loan from a bank may take 30-45 days or longer. A bridge loan on investment property, can be approved and funded by a hard money bridge loan lender within 5 days if needed.
The maximum amount you can borrow with a bridge loan is usually 80% of the combined value of your current home and the home you want to buy, though each lender may have a different standard.
Although bridge loans are secured by the borrower’s home, they often have higher interest rates than other financing options—like home equity lines of credit—because of the short loan term. … This makes bridge loans a risky option for homeowners who aren’t likely to sell their home in a very short amount of time.
Good news. Interest on loans for the purchase or improvement of up to two residences is tax deductible, so it is likely that you can deduct the interest on both mortgages and the bridge loan. And property taxes are tax deductible on all properties that you own as well.
Bridge Loan Cons
The cons of a bridge loan typically involve a high interest rate, transaction costs and the uncertainty in the sale of the asset where the money it tied up. Bridge loans are meant to be temporary devices to free up money that is tied up pending the sale of the real estate asset.
Bridge loan fees
Expect to pay 1.5% to 3% of the loan amount in closing costs for a bridge loan. Additionally, bridge loan rates can be as high as 8% to 10%, depending on your loan amount and credit profile.
A balloon loan is a loan that you pay off with a large single, final payment. Instead of a fixed monthly payment that gradually eliminates your debt, you typically make relatively small monthly payments.
Some well-known banks that offer bridge loans include:
- Bank of Scotland.