#2: Bridge Loans Have to be Backed by Security
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Exactly as a mortgage loan was backed by our house you to you buy with the installment loans online Pennsylvania money, connection financing must be supported by collateral to safeguard this new lender’s reputation. For the home, the most common supply of collateral ‘s the buyer’s present house.
Such as, for those who ordered a special family and got out a link mortgage to purchase mortgage on the established home, your own bridge financing will be backed by your existing family. When that house is offered while personal on it, the newest proceeds from the newest closing is used to pay-off the fresh new bridge mortgage.
#3: Connection Loans Normally have Higher Interest rates Than Mortgage loans
A unique determining attribute out of bridge money is that they typically have large rates than just mortgages. You need to assume their price is regarding the dos% more than it would be if you were making an application for good conventional financing.