An Arizona bridge loan can help homeowners as they transition between homes. This type of loan is a win-win if you want to move, have a buyer lined up, and your deal runs into unexpected difficulties.
Say you’ve put in an earnest offer on your dream home. The house is just everything. It has a pool, room enough for the kids, and separate space for an art studio. You made an offer on contingency because you’ve got a buyer lined up on your current home, but the deal just hasn’t closed yet.
As the deadline to close approaches, you find yourself packing boxes, all ready for the money to come through, and then you get a call. It’s your buyer.
“Listen, I’m going to need another 60 days before I can get you the money. We’ve got a mold issue we need to resolve.”
You then call up the current owner of your dream home, asking for a little more time, but they too are fully packed and ready.
They tell you, “Someone put in a full offer right after you. Maybe I’ll just call them. It’s too much of a hassle to unpack my whole house again.”
You ask for a week, and the seller reluctantly agrees.
You hang up, dejected and furious, certain that all hope is lost.
Since your home hasn’t sold, you don’t have the money for a down payment on your next house. But, you realize you have about $100K in equity in your current home. You think, “Can’t I just borrow against that?”
You look up “bridge financing,” and you learn that these loans allow you to cash out up to 90% of the outstanding equity on your current home. At first glance, the 12% interest rate makes you shudder, but you sense it might be your only hope, so you bite the bullet. The $90,000 in bridge financing is more than enough to make a down payment on your next home.
The process is fast enough that you don’t even need that extra week, and move into your new home the next day.
You put your bridge financing to work, making a down payment on the second mortgage on your dream home. You are a bit nervous, because basically, you have two mortgages at this point in addition to bridge financing.
The 60-day window passes. You nervously sit by the phone waiting for the buyer of your old home to call, and sure enough, they do. It seems they’ve got their act together. The papers are signed, the money comes through. The proceeds from the sale of your old house pay off your first mortgage and that $90K in bridge financing. Now you only have one mortgage.
And you live happily ever after in your newly secured dream home.
The situation just described is a perfect example of when to use bridge financing.
The main risk with this type of loan is that you move from one home to another, but your former home doesn’t sell, leaving you on the hook to pay off the bridge loan. However, if you have a firm assurance that your home is going to sell in a handful of months, bridge financing isn’t such a risky proposition.
In short, don’t let an unsold home keep you from purchasing the home of your dreams.
Level 4 Funding LLC
Hard Money Lender
Hard Money Loans
Hard Money Loan
Arizona Tel: (623) 582-4444
Texas Tel: (512) 516-1177
Dennis Dahlberg Broker/RI/CEO
NMLS 1057378 | AZMB 0923961 | MLO 1057378
22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
111 Congress Ave | Austin | Texas | 78701
About the Author: Dennis has been working in the real estate industry in some capacity for the last 40 years. He purchased his first property when he was just 18 years old. He quickly learned about the amazing investment opportunities provided by trust deed investing and hard money loans. His desire to help others make money in real estate investing led him to specialize in alternative funding for real estate investors who may have trouble getting a traditional bank loan. Dennis is passionate about alternative funding sources and sharing his knowledge with others to help make their dreams come true. Dennis has been married to his wonderful wife for 43 years. They have 2 beautiful daughters 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.