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Understanding the type of loan you're getting matters, to protect your financial interests. You also need to know when to choose one type of loan over another. So, should you choose a bridge loan? When might that be the best choice for getting into the home of your dreams? Here's what you need to know about this particular loan type.
Bridge loans typically provide temporary home financing, and are designed for use for six to 12 months. They carry an interest rate that is approximately two percent higher than a standard mortgage. These loans can "bridge" the gap between buying one property and selling another, allowing the borrower to get into a different home before their original home is sold and closed.
Anyone who owns a home and is trying to buy another one could potentially get a bridge loan. Just as with a traditional mortgage, though, you would have to qualify. Income and equity requirements must be met. There is also usually a debt-to-income ratio that's very important, since you'll have to make loan payments for a few months.
When you're selling your home but you haven't found a buyer yet, you might find another home you want to buy. Since you don't have the funds from the sale of your current home, you wouldn't normally qualify to buy the other home. If you can get a bridge loan, though, you can buy the second home while still trying to sell the first one. When the first one sells and you receive the proceeds, you can use that money to pay off the bridge loan. Bridging that gap between the financing for the two homes can be vital in markets where housing is very competitive, or where you need to move quickly to purchase a particular home.
Getting a bridge loan involves talking to your bank or other lender, just like you would with another type of loan. Not all lenders offer bridge loans, so it's important to shop around. Additionally, your real estate agent can be a great resource when it comes to finding a bridge loan. Some agents even partner with lenders for these kinds of loans, to give their clients more options.
If you're not sure whether a bridge loan is the right choice for your home buying and selling needs, talking to your lender and real estate agent can help. There are times when borrowing additional money isn't a good choice, but these kinds of loans can also be very beneficial in certain real estate circumstances.
Meet Kimberly Jokela:
With a genuine passion in people Kimberly loves helping her clients make their real estate dreams or needs come to life! Specializing in Luxury, Vacation, Retirement or Investment properties.
Born and raised in the midwest in a family with a strong work ethic, filled with creativity & dedication.
Her determination lead her to attend college at the "Philadelphia Performing Arts" where she had the opportunity to follow her passion in the Arts & to travel. Living in California with her husband Rick for 15 years together they built a successful business. After the birth of her beautiful daughter Brittany, seeking a "small town” coastal lifestyle, they took a trip to Naples Florida & fell in love with all it has to offer and made the jump!
With now over 17 years experience as a licensed Realtor serving Naples, Bonita Springs, Marco Island, Estero & Fort Myers.
A great listener, negotiator & connector, Kimberly is dedicated to helping her clients looking to BUY their ideal Florida property!
Her warm & friendly personality is present in everything she does on her clients behalf!
Kimberly’s creativity & "out of the box" thinking gives her clients the extra leverage they need when SELLING a property.
Her well organized marketing includes professionally produced photography, video, drone imagery, media presentation in print, numerous online websites & social media!