An Arizona Bridge Loan is money that is lent by a bank or investor to cover the interval between two transactions. A typical example is when a person is buying and selling a house.
Selling your home or buying a new home can be two extremely stressful times. Sure, it it exciting. However, it is that in between time that can easily cause anxiety for a buyer and seller. An Arizona Bridge Loan is simply a short-term loan that is used in both residential and commercial real estate.
Borrowers take out Arizona Bridge Loans when they want to buy a new house before selling their old house. Arizona Bridge Loans can ease this process and allow homebuyers to sleep at night. Arizona Bridge Loans can be structured in various ways depending on the situation. However, typically an Arizona Bridge Loan will be used to pay the mortgage off of the borrower’s old home. Usually, an Arizona Bridge Loan is interest only throughout the loan’s life—and a balloon payment is required as the last payment. This gives the homebuyer an opportunity to purchase a new home without paying two mortgages at once. Arizona Bridge Loans generally are only a few months, but some may last up to two years.
This is a question that has many variables to it. A borrower must factor in their new purchase price, how much cash they have to put down on their new home, how much their first mortgage, loan term and interest rate are, the Arizona Bridge Loan interest and the anticipated Arizona Bridge Loan term.
Let’s assume the following to give you an idea of what a borrower would be paying if they were to take an Arizona Bridge Loan and pay off their first mortgage monthly.
Ken finds a home for a purchase price of $250,000. He has $10,000 available to put down on this new property. His old mortgage was $180,000 for 360 months with an interest rate of 6.5%. His Arizona Hard Money Lender is approving him at 7.99% with a 24 month term. With those numbers Ken would be looking at his Arizona Bridge Loan payment of interest only at $399.50. So, instead of paying both mortgages until the old property sold—he is paying a total of $1,532.22 per month ($1,137.72 on his new mortgage and $399.50 for his Arizona Bridge Loan). Once Ken sells his old property he can take that money and pay the balance on the Arizona Bridge Loan—while he pockets the profit.
Depending on the market you live in it is highly plausible you may only be paying on your Arizona Bridge Loan for a couple of months. But, in the case that your home takes a little longer to sell, you have peace of mind not having to shell out two mortgages a month. See an Arizona Hard Money Lender and find out how they can take the stress off of you.
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Dennis Dahlberg Broker/RI/CEO
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22601 N 19th Ave Suite 112 | Phoenix | AZ | 85027
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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 and 5 amazing grandchildren. Dennis has been an Arizona resident for the past 40 years.