Information about a bridge loan
A bridge loan is basically a short-term loan pending another loan in the near future. They are often used to close on a property in a short period of time, stop the process of forclosure on a property, or to fill an immediate need for financing to plan for long term financing.
A common use of a bridge loan among consumers is borrowing enough money to pay down on a new home before closing the sell on their current home. The profit from the sell of their old home will be used to pay off the bridge loan balance.
There are many cons of using a bridge loan because of the high risk to the lenders. Cons include much higher interest rates usually between 12% – 15%. There will also probably be more fees associated with a brige loan as well as points paid to close the loan. Typical term lengths on bridge loans are ususally less than 3 years.