How to Use a Bridge Loan to Buy a New Property
Categories: Blog Posts
What are your options when a past project is stuck on the market? Here’s how to use a bridge loan to buy a new property.
Gone will be the days of fix-and-flips selling within hours.
In this new market, real estate investors need to prepare for the possibility of their projects staying on the market for quite a while.
To avoid a full standstill in your real estate investment career, you have to know how a bridge loan can help you buy a new property.
Buy a New Property with a Bridge Loan in 2022
Instead of selling in two to three days, we’ll soon see houses taking two to three months to sell, depending on size and location.
Your investment career can’t come to a halt just because a house takes too long to sell. What if you find a great deal while your old project is still on the market? All your capital is tied up in that first property.
Bridge loans solve this problem.
A bridge loan puts a lien on both the new property and the old property. This gives you the equity needed to close on a new house before the money from selling the old one hits your pocket.
Using a bridge loan to buy a new property is the number one use of bridge loans.
What to Look For In a Bridge Loan
Bridge loans are all about getting the right lender and the right position.
Terms of a Bridge Loan to Buy a New Property
It’s important to pay attention to the terms of a bridge loan. You want a lender who charges fewer points – even if their interest rate is higher.
You only have to pay interest in small, monthly chunks. With points, you have to pay a percentage of the whole loan. Since bridge loans are very short-term, you won’t end up paying much in interest anyway. However, you’ll still have to pay the points (regardless of how long you kept the loan).
Shop Around for Lenders
Make sure you shop around for the right lender for your bridge loan. Find out who does bridge loans, who can do them quickly, and who focuses more on the interest rate rather than other costs (originations, appraisals, etc.).
Bridge loans are meant to be quick, short-term, and relatively inexpensive. You want to find a lender who can provide that.
Read the full article on bridge loans here.
Watch the video here: