Countersignature Bridge Loan Agreement Made Easy

E signature bridge loan agreement

hey guys welcome back I'm Jeff Smith Coldwell Banker Residential Brokerage here in Southern California today we're gonna talk about bridge loans I'm gonna tell you what a bridge loan is I'm also going to tell you how you use bridge loans essentially to buy a property without selling your existing property and why you would want to do that and lastly qualifying for bridge loans so let's start with the basics on what a bridge loan is a bridge loan is essentially a short term loan that allows you to use the equity from your current home to buy a new property without selling your current home and so why would you want to do that well you know we're in a market where it's very very competitive homes come on the market and if they're priced correctly especially in certain price points they sell very very quickly so if you're you know if you've got a house to sell even it's if it's in escrow you have to make a contingent offer on that new property which basically means that you're you're purchasing the new property is contingent upon selling that existing property and a lot of sellers may look down on that especially if there's multiple offers on the table and you've got somebody on the other side that has a similar situation oh a similar down payment similar borrower buyer if you will but doesn't have the contingency right so there's probably gonna lean more towards the person that doesn't have the contingency well a bridge loan can essentially allow you to buy that property without having a contingency and how that works is you know more or less if you have equity in your existing property and that's the key component here you need to have equity in your existing home in order to do a bridge loan in most cases and what they allow you to do is take that equity and buy the new property without selling your existing property essentially they combine the two mortgages and a lot of times they want to see an 80 percent loan to value out of the two total mortgages so what you what you currently owe and what you're going to be the the new mortgage on your property they want about 80 percent equity and what they do is allow you to to buy that new home without selling your current home and that short-term loan that I mentioned that's what a bridge loan is it's a short-term loan this something you're gonna hang on forever is generally a six month to a year type loan so generally they'll give you about six months once you purchase that property to sell your existing home so that you can refinance out of that bridge load into a new loan now what happens if you don't sell your property in six months well a lot of lenders will give you a year out but at the end of the day you know you've got to have a plan of action in order to sell that property right because you know the cool thing about a bridge loan or a lot of them not all of them work this way but a lot of lenders that do bridge loans will allow you to defer the payment on the new mortgage while you know while you're trying to sell the the existing home that way you're not having two mortgages to pay in that you know the key here right so a lot of people are going to stress out that you got two mortgages to pay by keeping a property and buying another property well they allow you to defer those payments it's not that they're gone forever or or what-have-you you're gonna have to pay them but you can pay them after the existing house sells it's just kind of paid in arrears if you will so that's how a bridge loan works like I mentioned a lot of lenders want to see at least 20% I mean 80 percent loan to value so they want to see at least 20% equity in those properties in order to qualify for them you know it's they're they're more strict than your conventional loans right I mean they want to see good credit they want to see income so it's a lot like qualifying for a traditional property but the key component here more than anything else like I mentioned is equity in bridge loans you know that the upside is that they allow you to to buy something without having to sell your current home so that's a huge plus and you know put that on the on the pro side the con side would be you know you've got to have a plan to sell your property right so if it's it's a short-term loan if your house is listed and it's not selling you know at some point that bridge loan is going to come up and you're gonna have two mortgages right so you're going to be in a position where you have to pay both mortgages if you're not selling that existing home so you know you can't just hang on to it forever you've got to have a plan of action to get rid of that second property and that can be the downside right that could put stress on you having to sell that existing home it could make you take a value less than what you really want to accept at some point once you get down into the the process of selling that property you know if it's not selling you know you may have to sell it in order to to get out of it to pay off the bridge loan and what-have-you and then another side is the fees are you know another con if you will is the fees are a little bit higher than do in say a home equity line on your property and you're gonna have to refinance out of it right so you're gonna have another loan at the end of it that you're gonna have to get out of so those are some of the downsides but the plus is that really it allows you to buy a property non-contingent right and in a market where we are right now you know it could it could kind of set you apart from different offers so something to keep in mind you know with bridge loans there's clearly you know there's a lot of lenders that do on each lender maybe a little bit differently that may do them a little bit differently but if you have questions about them reach out to me I'm happy to put you in touch with somebody who does them and knows them very well you know in the difference between this and a hard money loan right so you know the hard money loan is similar but a hard money loan doesn't you know allow you to just basically take the equity out of your current property and use it to buy another property at the same time right so it's it's this isn't a hard money long bridge loans are different so I'll do a video on hard money but if you have additional questions on bridge loans comment below contact me directly I'm happy to help as always I appreciate you taking the time to watch and we'll see you again soon bye-bye