By Travis Gunderson | Vice President & Commercial Loan Officer | Lincoln Pioneers
A bridge loan is a short-term financing option that helps “bridge” the gap between purchasing a new property and selling an existing one.
It’s designed to provide you with the liquidity you need during transitional periods, typically lasting from a few months to a year. Unlike traditional loans, which might require a lengthy approval process, bridge loans are intended to provide fast access to funds.
The loan is typically secured by collateral, most commonly your current and future property. The bridge loan is paid off once your old property is sold or other longer-term financing is secured.
How Does a Bridge Loan Work?
Here’s how a typical bridge loan function:
Application and Approval: You apply for a bridge loan with us and, upon approval, receive a lump sum amount, typically the same amount of the purchase price of the property you’re purchasing.
Use of Funds: You can use the funds to purchase your new property with little to no down payment.
Repayment: Once your old property sells or you secure permanent financing, the loan is repaid.
Bridge loans often have higher interest rates than traditional loans, reflecting their short-term nature and quick accessibility. However, their flexibility and speed usually make them worth the investment for those needing fast capital.
Why Consider a Bridge Loan?
Buying a New Home Before Selling Your Current One:
If you’ve found the perfect new home but haven’t yet sold your current property, a bridge loan can help you secure your new home without waiting for the sale. This allows you to move quickly and avoid losing out on a great opportunity.
Avoiding Contingency Offers:
In competitive markets, sellers often prefer offers without contingencies. By securing a bridge loan, you can present an offer without the contingency of selling your existing home first, making your offer more attractive.
Closing Quickly on a New Property:
Bridge loans provide the necessary funds when it’s crucial to close on a property fast. With this type of loan, you avoid delays and position yourself as a serious buyer, which can be an advantage in a hot market.
“Our bridge loans are designed to help you make a smooth transition, giving you the freedom to move forward without the stress. Let us be your partner in making your next chapter possible.”
Is a Bridge Loan Right for You?
While bridge loans offer flexibility and quick access to funds, but they’re not for everyone. Their short-term nature is best suited for those who can confidently repay the loan in a short time frame, typically through selling a property or securing longer-term financing.
At Midwest Bank, we’re committed to helping you explore all your financing options. If a bridge loan sounds like the right solution, we’re here to guide you through the process and tailor a solution that fits your needs. Contact our team today if you have questions or want to explore loan options.