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What Are the Pros and Cons of Bridge Loans in Los Angeles?

November 27, 2018 By ajwpaccess

Pros and Cons of Bridge LoansThere may come a time when you find yourself in a transitional situation with housing. You could be in the process of selling your existing house, but you do not want to wait to put down money on your next home.

If that should happen, you may find yourself short of the money you need to finance the down payment. For that purpose, you can consider taking out a short-term loan called a “bridge loan.” This type of loan is secured, with your present home acting as collateral.

Bridge loans are not as common as they once were and tend to be handled very much on a case-by-case basis. In some cases, they are the best fit, but in others, it may be more appropriate to go with a home equity loan or line of credit.

Here are some of the pros of bridge loans:

  • With a bridge loan, you give yourself far more flexibility in terms of the timing of both the sale of your current home and the purchase of your next home. You do not need to wait for your current home to sell before making your down payment on your next home.
  • You may have more bargaining power. Say you see a house that you love, and you want to make an offer. You tell the seller that you are certain you will purchase the house once yours sells. You may have every intention of following through, but the typical seller will not take this seriously. The seller is looking for certainty, not surprises. If you have a bridge loan, the seller knows that you can afford the down payment and that your house does not need to sell by a certain date for you to make the purchase.
  • You can get the house you really want. While a bridge loan is an added cost and complication, it may make the difference between whether you can buy your dream home or not. Over the long term, both the tangible and intangible benefits of living in the house you really love may vastly outweigh the short-term inconveniences of the loan.
  • Bridge loans typically offer a fair degree of flexibility when it comes to repayment options.
  • There may be a grace period before you must make payments on the bridge loan. Oftentimes, this period lasts for several months. Just be aware that the loan is still earning interest even during the months when you’re not making payments.

Here are some of the cons of bridge loans:

  • You will need to make payments on the principal and interest of the bridge loan. While this is obvious, in many cases, it may be an entirely avoidable financial burden. If you pay the loan off early, there may sometimes be a prepayment penalty (as this is a short-term loan product however, you may be able to avoid that).
  • You are expected to pay back the bridge loan relatively quickly. Hypothetically, this should be feasible once you sell your existing house. But it does mean making large payments. If there is an issue selling the current house or obtaining financing on the new one, this may lead to problems.
  • For some period, you may find yourself as the owner of two properties. Bridge lenders consider then when deciding whether to offer you a loan. Owning two homes even for a short time period can strain your budget, and any uncertainty concerning the sale of your existing property adds to the risk. This can make it harder to qualify.
  • Competing products like home equity loans and lines of credit are often less expensive than bridge loans, which is one reason they have risen in popularity over the years.

We Can Help You with Your Bridge Loan Needs

Think a bridge loan in Los Angeles may be right for you? We can assist you in examining the pros and cons with reference to your financial situation and needs. We also can connect you with a competitive, flexible bridge loan if you qualify. Please give us a call at (310) 478-5005 to schedule your Los Angeles bridge loan consultation.

Filed Under: Bridge Loan Tagged With: Home Loan, Los Angeles, Mortgage

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Client Testimonials

Thanks PacShores for coming through for me in the nick of time. After our Parents passed away and left the small apartment units that I was living in to me and my two siblings, they needed to get out their portion of the inheritance and were determined to force me to sell the units. I needed to keep the property for my family and avoid selling in such a down Market. My Income was low and the Banks refused to accepts the Rental Income from the other Tenants and to approve my loan. It wasn’t a problem when I contacted PacShores, they funded my loan in no time, paid off my siblings, hassle free, and I am very glad I found them.

Tony – Orange, California

 

I took over some Apartments that my Dad owned and had been renting out over the years. Some of the tenants had been there for 10 years and more, the Properties have gotten in disrepair, and the County had also filed substandard violation Liens on the Properties. All the Lenders that I had applied to for a Cash-Out Loan, turn down my application due to the condition of the Properties. With the help of the Loan Officers at PacShores, we were able to customize a loan for me that set aside funds to complete the needed repairs, and clear up all the Substandard Notices and Liens on the Properties, and the extra cash that I needed.

Tracy – Los Angeles, California

 

Hi, I am Real Estate Broker, and Short Sale specialist, and I had very well qualified Buyer with almost 50% cash down payment, under contract on a highly discounted Investment Property purchase. After 3 weeks of getting the runaround with their Bank including my regular Lenders that I normally use, I was convinced they would lose out on this great deal. Luckily an associate referred me to PacShores Mortgage, and within 24 hours they drove buy the property, and had Closing Documents in Escrow by the third day and funded the loan right after. They saved this deal for us. I couldn’t thank them enough and would use and recommend them to all my associates in the future.

Javier – West Covina

 

Hello, our Credit Scores had become so low after we went through a Loan Modification process and Short Sale on our previous house. Thereafter, we couldn’t find a Bank willing to consider us for a new Home Loan, even though we had substantial funds for a Down Payment. The folks at PacShores Mortgage were very understanding and glad to review and approve our loan application. Thanks to them, we are proud owners of a new, more affordable four Bedroom house again.

Susan – Fresno, California

 

My wife and I own a successful and profitable Business, and also own a number of Rental Units. Due to the Freeze in Bank Lending we decided to refinance one of the Rental Units we own outright, to access the credit we need to efficiently run our Business. Unfortunately due to the write-offs we show on our Tax Forms, the Banks we contacted were misreading our Income and cash flow and declined to approve our loan application. Our experience was different at PacShores, the easily identified our true Income and approved our loan promptly, and we didn’t even need to provide them any Tax Returns.

Cindy – San Diego, California

 

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