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Bridge Loan Definition:
A bridge mortgage loan is a loan
that helps to "bridge" the gap between one
home or property and another, without the benefit of
cash proceeds from the sale of the previous home or
property. A bridge loan is also sometimes referred to
as a swing loan.
Why would someone use a bridge
real estate loan?
A bridge loan is a way for a homeowner to cover financing
costs when selling a home or property and purchasing
another. The bridge loan provides financing to buy a
new property before the proceeds of the old property
become available. Bridge loans can be risky if the sale
of the old property falls through.
A bridge loan is usually based on the amount of equity
in the borrower’s current property with the proceeds
going towards the purchase of the new property.
Bridge Mortgage Loan Structure
Terms of a bridge loan can vary. Some bridge loans are
structured so that they completely pay off the old property's
first mortgage, while other bridge loans pile the new
debt on top of the old.
A typical bridge loan might be structured as follows:
The bridge loan is used to pay off the existing mortgage,
and the remaining money from the bridge loan (minus
closing costs and six months prepaid interest) is used
as a down payment on the new property. If, after six
months, the old property still is not sold, the borrower
will begin making interest-only payments on the loan.
Often, the bridge loan has a term of one-year. The mortgage
on the new property must be financed by the same lender
who extended the bridge loan.
If you would like to apply for a bridge real estate
loan through the Coastal La Jolla Funding Group, click on our
bridge loan application.
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