If you’re an existing homeowner looking to upgrade to a new house, a bridge loan can help you make a strong offer to purchase your next home. A bridge loan is a special temporary loan that helps people bridge the gap between an existing home and a future home. To be eligible for a Royal bridge loan, you must use a Royal mortgage for your future home.
How A Bridge Loan Works
A bridge loan is a short-term option that can help people upgrade to a new home. It’s a temporary source of funds until you complete the sale of your existing home. Here’s how it works:
- You own a home that has available equity. Equity is the difference between the property value and the amount you owe on your mortgage.
- You want to make an offer to purchase a new home without the offer being contingent on the sale of your existing home. You may also need to sell your existing home before you can afford a down payment for your new home.
- You obtain a bridge loan using your existing home as collateral. The bridge loan amount is based on the available equity in your existing home.
- You can use the bridge loan funds as part of your down payment on your new home.
- You obtain a traditional mortgage to finance your new home. For a short time, you have both the bridge loan and the traditional mortgage.
- When your existing home sells, you use the funds to repay the bridge loan.
Who Should Use A Bridge Loan?
In a competitive home market, sellers are more likely to accept an offer to purchase that isn’t contingent on the sale of another home. By using bridge loan funds, potential buyers can avoid the need to include a sale contingency on their purchase offer.
Keep in mind that a bridge loan is not a form of permanent financing. Unless your bridge loan covers the full purchase price of your new home, you will still need to use a typical home loan, like a 30-year fixed rate mortgage.
Learn If A Bridge Loan Is Right For You
The best way to learn if a bridge loan is right for you is to contact a Royal mortgage expert. Our experienced professionals will review your individual financial situation, credit qualifications, and other details to help you select the best financing option.
Find a mortgage loan expert near you or call 715-833-7251 to discuss bridge loans at Royal Credit Union.
Loans subject to credit approval. Equal Housing Opportunity.
