A hot real estate market can require you to secure your new home before your old one closes. For many homeowners in this situation, the down payment of their dream home is often more than the cash they have on hand. For these unique situations, private lenders California offer bridge loans. Explore the pros and cons of bridge loans and find out if you should use one for your current real estate situation.
The Purpose of a Bridge Loan
Many homes in California require a significant down payment. The hottest real estate goes fast, so as a buyer you can’t always wait until your current home closes before closing on your new home. Access the cash you need for a quick closing to beat out the competition and seize the real estate of your dreams. A bridge loan is backed by your current real estate. It comes with a few negative features and a few positive features. While it adds risk to your situation, it allows you to leverage your finances in a way that you may not otherwise be able to.
Pros of a Bridge Loan
A major benefit of choosing the best residential bridge loan lenders is that you can purchase a home without the contingency that your current home sells. If your current home is in a desirable location, there’s little risk that it won’t sell at all. However, a bridge loan speeds up the process and allows you to move into your new home while still waiting on the paperwork of your old home to come through.
This convenience allows you to negotiate with sellers and offer a fast closing time. Sellers are motivated to make a quick sale, so this feature can put your offer at the top of their list.
Cons of a Bridge Loan
There are two main disadvantages of using a bridge loan. First, you must pay a higher interest rate while you wait for your first home to sell. Second, there is a risk that your first home won’t sell.
The first disadvantage means that you’ll be paying a slightly higher interest rate while you wait for your sale to clear. The additional payment won’t be significant if your home sells in a few months, but a long-term bridge loan can be costly.
Second, if your home doesn’t sell, you may have to find an alternative way to pay off the bridge loan. Be sure your home is an ideal candidate for a bridge loan before using it. A valuable home in a popular location shouldn’t have this issue, but it is a small risk.
Find Out if You Should Use a Bridge Loan
Bridge loan rates and features can vary depending on your lender. Compare the best hard money lenders Los Angeles to learn more about bridge loan rates and find out if it’s right for you. Enjoy a convenient transition from your starter home to the home of your dreams with a competitive bridge loan for your real estate in California. Discuss your options with a local private lending institution to discover great rates on a bridge loan for your specific situation.