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Bridge Loans Can Help Pay Off Your Old Home
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.
Rates
See today's average rates across the country.
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Loan Type Today Last Week 30 Year Fixed 6.26% 6.23% 15 Year Fixed 5.78% 5.79% 1 Year ARM 6.14% 6.08% 30 Year Fixed Jumbo 7.32% 7.35% 5/1 ARM 5.58% 5.63% 3/1 ARM 5.44% 5.49% Source: Bankrate -
Loan Type Today Last Week $30K Home Equity Loan 7.64% 7.63% $50K Home Equity Loan 7.42% 7.42% $75K Home Equity Loan 7.69% 7.69% $30K HELOC 4.67% 4.66% $50K HELOC 4.38% 4.38% $75K HELOC 4.37% 4.37% Source: Bankrate -
Loan Type Today Last Week 36 Month New Car Loan 6.80% 6.80% 48 Month New Car Loan 6.84% 6.83% 60 Month New Car Loan 6.49% 6.48% 72 Month New Car Loan 6.32% 6.32% 36 Month Used Car Loan 7.14% 7.14% 48 Month Used Car Loan 6.84% 6.83% Source: Bankrate -
Card Type Today Last Week Balance Transfer 10.31% 10.03% Low Interest 11.01% 10.97% For Bad Credit 13.02% 13.12% Cash Back 11.47% 11.46% Business 11.10% 10.91% Airline 12.75% 12.69% Source: CreditCards.com
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