If you are trying to buy a property, you may consider getting a bridge loan. This can be a powerful tool to help you get financing that you may otherwise be unable to secure.
For example, you can use a bridge loan when you haven’t yet sold your existing home to cover the down payment.
Of course, many people want to get 100% financing if this is the case. Read on to learn how to achieve this.
What Is a Bridge Loan?
Bridge loans are hard money loans meaning they are secured against real estate. They are intended only for short-term use.
You may be a bridge loan because you are moving from one primary residence to another and don’t want to be forced to make a contingency offer on your next home. In other words, you don’t have to sell your current house right away to buy the new house.
In some cases, people also use bridge loans to take advantage of time-sensitive investment opportunities. This may be just as a short-term loan while securing long-term financing or as a way to make a down payment on a commercial mortgage.
Property Types That Get the Best Terms
There are a few ways that you can secure a 100% loan-to-value ratio on your bridge loan. The easiest way by buying a primary residence. Lenders generally offer better terms on bridge loans for homes.
One of the reasons that lenders typically require down payments is so that you have “skin in the game” from the start. Otherwise, borrowers may be tempted to skip out on loans because they have little equity to lose.
However, if the real estate is your primary home, you inherently have skin in the game. Therefore, you can generally expect better loan-to-value ratios for home purchases.
If you have an existing home that can be collateral for your bridge loan, you may be able to get 100% financing. Of course, it helps if you have a large amount of equity in your existing property.
The other way to get 100% financing is to have other real estate. If you are a real estate investor, for example, you may be able to get a bridge loan on a property by having other buildings that can serve as collateral.
Finding the Right Lender
One of the most important elements in finding 100% bridge loan financing is to have the right lending partner to work with. Some lenders are more lenient than others.
You can typically expect private money lenders to be more flexible and more likely to offer 100% financing. You should expect the higher loan-to-value ratio to come with a higher interest rate due to the increased risk.
The good news is that there are plenty of private lenders California residents can consider using. Not all are as good as others.
However, there is a large pool to look at. Check out what lenders are able to offer. Once you find the right financing partner, continue using them.
Having a relationship with your lender will help you get better loan-to-value ratios in many cases. Start exploring your options today.
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Author: Anees Saddique