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Bridge Loans Can Help Pay Off Your Old Home

Friday, September 29, 2006provided by

For some home buyers, purchasing that new home involves selling an old one. That's why some borrowers look for a "bridge loan" to span the gap between the two transactions.

Terms of a bridge loan can vary. Some are structured so that they completely pay off the old home's first mortgage, while others pile the new debt on top of the old.

A typical bridge loan might be structured as follows:

•    • The loan is used to pay off the existing mortgage, and the remaining money -- minus closing costs and six months prepaid interest -- is used as a down payment on the new home.

•    • If, after six months, the old house still is not sold, the borrower will begin making interest-only payments on the loan

•    • The loan has a term of one-year.

•    • When you sell your current home, the bridge loan is paid off. If it is sold within the first six months, any unearned interest payments will be credited to you.

•    • The mortgage on the new home must be financed by the same lender who extended the bridge loan.

Tip

Bridge loans are costly because of high fees. You might consider other financing such as borrowing against a 401(k) plan or taking out loans secured by stocks or other assets.

Copyrighted, Bankrate.com. All rights reserved.

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• Mortgage

  Loan Type	Today	Last Week
  30 Year Fixed	5.13%	5.16%
  15 Year Fixed	4.70%	4.60%
  1 Year ARM	3.98%	4.00%
  30 Year Fixed Jumbo	6.06%	6.10%
  5/1 ARM	4.30%	4.26%
  3/1 ARM	4.75%	4.80%

  Source: Bankrate
• Home Equity

  Loan Type	Today	Last Week
  $30K Home Equity Loan	8.35%	8.39%
  $50K Home Equity Loan	8.36%	8.41%
  $75K Home Equity Loan	8.39%	8.44%
  $30K HELOC	5.24%	5.26%
  $50K HELOC	4.99%	5.00%
  $75K HELOC	4.99%	5.00%

  Source: Bankrate
• Savings

  Savings Type	Today	Last Week
  6 month CD	1.13%	1.15%
  1 year CD	1.61%	1.63%
  3 year CD	2.28%	2.29%
  MMA	1.04%	1.05%
  $10K MMA	1.13%	1.13%
  $25K MMA	1.34%	1.35%

  Source: Bankrate
• Auto

  Loan Type	Today	Last Week
  36 Month New Car Loan	6.90%	6.96%
  48 Month New Car Loan	7.05%	7.12%
  60 Month New Car Loan	7.11%	7.18%
  36 Month Used Car Loan	7.39%	7.43%
  48 Month Used Car Loan	7.50%	7.51%

  Source: Bankrate
• Credit Cards

  Card Type	Today	Last Week
  Business Credit Cards	9.69%	9.69%
  Low Interest Credit Cards	11.91%	11.91%
  Cash Back Credit Cards	12.36%	12.36%
  Reward Credit Cards	12.85%	12.85%
  Instant Approval Credit Cards	13.32%	13.32%
  Balance Transfer Credit Cards	13.46%	13.46%

  Source: CreditCards.com

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