Bridge Loan Alternatives
What Other Options Do You Have Instead of a Bridge Loan?
Before you obtain a bridge loan, you should first understand what a bridge loan is and whether or not there are any alternatives worth considering. A bridge loan serves as a financial bridge between one home and another. These loans are short term loans with high interest rates.
They are risky for both borrowers and lenders. There's no doubt that there are certain benefits to bridge loans. For individuals relocating or for anyone who is in an unexpected rush to purchase their ideal home a bridge loan can be very helpful. However, there are times when a bridge loan can go wrong.
Suppose you are unable to sell your home as quickly as you hoped you would. This would leave you with three monthly payments to make on two different homes. As you can imagine, this would be financially difficult to impossible for some borrowers. Although rates for bridge loans vary, they are on average going to be quite high. This is why it is so important to consider all the alternatives before going for the bridge loan.
One alternative to the bridge loan is the home equity loan. Or, you could borrow from your 401K. Either one of these options would certainly be cheaper than a bridge loan. If you have friends or relatives that would lend you money, that would even be preferable to getting a bridge loan. Another option would be to make sure your old home is sold before even thinking of looking for a new one.
If you have a savings account, you can use the funds there to finance the costs of buying your new home. Stocks and bonds are another possible source of funding. The point is that you should explore every option before settling on a bridge loan. These loans will work in a desperate financial situation but should be avoided if there are any reasonable alternatives. If you would like to learn more about the options you have when it comes to transitioning from one home to another without taking out a bridge loan, speak to a trusted financial advisor in your area.