Bridge Financing - Uptown Financial

Bridge the gap and build your future.

Bridge financing for your
short-term financial needs

At Uptown Financial, we understand that sometimes you need to purchase your dream home before your current home sells. Our Bridge Financing is designed to help you navigate this tricky situation with ease.

A bridge loan is a type of short-term financing that helps you secure a down payment on a new home by using your current home’s equity. It is designed to help homeowners “bridge” the gap between the sale of an existing home and the purchase of a new one. You will still make payments on your current home mortgage until it sells, and the equity of your old home will pay off the bridge loan.

Bridge loan terms can range from 90 days to 12 months or even longer. The lender qualifies you based on your income, credit, assets and an appraisal to confirm your home’s value. You will also need a copy of the Sale Agreement from your current home and the Purchase Agreement for your new home.

The way it works is simple: We determine how much of a bridge loan is required, how many days it’s needed for, and with that we can calculate what that looks like for you. You only pay for the days you require the bridge.

It’s a smart, stress-free solution that ensures your housing transition is seamless. Let us be your bridge to a smooth and worry-free move to your new home.

Bridge Loan Benefits

Flexibility in Finding a Home: You can secure a new home before selling your current one, eliminating the need to align closing dates perfectly.

More Moving Time: Reduces the stress of moving, allowing you to comfortably transition between homes.

Not Having to Pay Two Mortgages at Once: Typically, you only need to pay your current mortgage during the transition period. For multi-millionaires, partial payments can still be made on the bridge loan.

Simple Process: Lenders handle the details quickly and efficiently, letting you focus on more important tasks.

Access Your Equity: Leverage the equity in your current home to fund the down payment on a new home.

Quick Financing: Provides fast access to funds, allowing you to act swiftly on purchasing a new home.

Avoiding Contingencies: Makes your offer more attractive to sellers by removing the contingency of selling your current home first.

Bridge Loan Risks

Higher Interest Rates: Typically, higher than traditional mortgages, which can add to your overall borrowing costs.

Default Risk: Defaulting on either your current mortgage or the bridge loan can lead to the lender taking possession of your property.

Short Repayment Period: The limited timeframe to repay the loan can create refinancing pressure, especially if market conditions change.

Loan Size Limits: The amount you can borrow is usually limited by the equity you have in your current home.

Additional Monthly Payments: Adds another monthly payment to your budget, which can strain your finances.

Potential Market Risks: If your home doesn’t sell quickly, you could be left with two mortgages for an extended period, complicating your financial situation.

How A Bridge Loan Works

Imagine the closing date for selling your current home is 90 days away, but the closing date for purchasing your new home is in just 35 days. A bridge loan will cover the period between these dates, which is 55 days (90 days – 35 days).

For example, if you are purchasing a $350,000 home and have made a 5% deposit ($350,000 x 0.05 = $17,500), but plan to use the $165,000 equity from your existing home for the down payment, you might face a timing issue. Suppose your new home’s closing date is March 15th, while the sale of your current home closes on May 10th. In this case, you would need a bridge loan to cover the gap between your deposit and the total down payment.

The calculation would be as follows:

Total Down Payment Needed: $165,000
Deposit Made: $17,500
Bridge Financing Required: $165,000 – $17,500 = $147,500

This bridge loan of $147,500 will cover the equity you plan to use from your current home until it is sold, ensuring you can proceed with purchasing your new home without delay.

What are the costs associated
with bridge financing?

Bridge financing costs typically include interest charges, which are often higher than traditional loans due to the short-term nature and increased risk, as well as arrangement or origination fees paid to lenders for setting up the loan. Borrowers may also incur legal and administrative fees, and if the loan is secured by collateral such as real estate, there could be appraisal and inspection expenses. Borrowers should also consider potential penalties or prepayment fees if they repay the bridge loan early, as well as the impact on overall cash flow and financial planning.

These additional expenses are usually included in your closing costs, which you should plan for separately from your down payment — they cannot be rolled into your new mortgage amount.

Overall, bridge financing costs are designed to compensate lenders for the quick turnaround and higher risk involved in providing interim funding until permanent financing or other arrangements are secured.

How To Qualify For A Bridge Loan

– Demonstrate sufficient equity in the property, typically at least 20-30%.

– Provide a clear exit strategy, such as a plan to secure long-term financing or sell the property.

– Show strong creditworthiness and a solid financial background.

– Present detailed documentation of the property’s value, including recent appraisals, title and current mortgage statements.

– Maintain a low debt-to-income ratio to reassure lenders of repayment ability.

– Have a well-defined purpose for the bridge loan, such as renovations or property purchase.

– Offer collateral, usually the property itself, to secure the loan.

– Provide proof of income or assets to verify financial stability.

– Provide a copy of the original purchase agreement and a copy of the sale agreement for your current property.

FAQ’s

How long does bridge financing usually last?

Bridge financing is designed to be short-term, typically lasting anywhere from a few months to up to 12 months. The exact duration depends on your specific situation — such as the timing of your home sale or the closing date of your new purchase. At Uptown, we tailor the terms to fit your timeline and ensure a smooth transition.

What are the costs associated with bridge financing?

Bridge loans are short-term solutions, and with that comes a different cost structure than traditional financing. You can expect higher interest rates, along with potential setup or origination fees, legal costs, and appraisal fees. At Uptown, we make sure all costs are clearly outlined upfront, so you can make informed decisions with no surprises.

How does one qualify for bridge financing?

To qualify for bridge financing, lenders typically look at the equity in your current home, your credit history, and your ability to repay the loan. You’ll also need a firm sale agreement on your existing property and a purchase agreement for your new one. At Uptown, we guide you through the process step by step — helping you secure the right solution with clarity and confidence.

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