The housing market has been a buyers market over the past year or two, with buyers holding most of the power in the negotiating arena. First time homebuyers have had an even greater advantage as they have been given an $8000 tax credit for purchasing a home this year and they don’t have to worry about selling another home before moving in. For “move-up” buyers who are trying to get out of in house and into something bigger, then challenge has not been finding a home they like, but instead selling the home they’re in.
A bridge loan is a loan that is written against the value of a home that’s for sale and is designed to provide cash to the owner to they’re able to proceed with purchasing their next property. Historically, bridge loans have been used in less than five percent of real estate transactions. Many more are applied for, but most are never used because the seller is able to arrange for the sale of their home in a timely manner.
– Adds Liquidity to the Market: With so many potential home buyers hesitant to act on a home purchase without knowing that a buyer is in place for their existing home, inventory is sitting on the market for much longer than it used to. Many experts agree that the housing market needs to see sales volume picking up to lead to a sustainable recovery and bridge loans are one financial tool that can add liquidity to a clogged up marketplace.
– Provides Flexibility to Buyers and Sellers: No one likes the idea of having two mortgage payments or being forced to accept a lower offer just to get out from under a home. In a normal housing market, it’s reasonable to think that a well-priced home could sell within a few months of hitting the market. In this market, there is no such feeling of certainty and sellers are hesitant to become buyers until they have cash in their pockets. With bridge loans, sellers can access cash and proceed with a home purchase regardless of when their existing home is able to sell. Bridge loans can last for as little as a few days and as long as several months.
– Great Deals Available: Many lenders are real estate brokers are working to stimulate buying in the housing market by offering bridge loans with little or no interest charged to the borrower. A zero percent bridge loan means that a seller can access enough cash to finance their next purchase without worrying about paying a lot of interest to finance that loan. The target market for these bridge loans is a homeowner with an average home moving up into something more upscale. This portion of the market has seen particularly slow sales volume and real estate agents and lenders hope to stimulate buyers into “moving up” with a little less worry tied to the sale of their existing home. These deals won’t last forever, but they’re worth looking into for the potential home buyer wondering why first time homeowners are the ones getting all the incentives to buy.