Bridging The Financial Gap With Homeowner Loans
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One of the smallest, quickest and shortest terms of homeowner
loans is referred to as a bridge loan. Compared with other
homeowner loans such as first and second mortgages, refinances,
home equity loans and debt consolidation loans that use the home
as collateral, bridge loans are rare.
A bridge homeowner loan is short term and designed for the
purpose of helping a homeowner bridge a cash crunch gap. Hence
the name bridge loan. The most common for of bridge homeowner
loans is the situation in which someone has bought a new home
but has yet to sell their current home. The most common reason
for this double ownership is a geographic relocation for a job.
Some homeowners will rent an apartment, condo, townhouse,
mobile home or single family home for a short term while
waiting for their home to sell. Others, however, see that for
convenience, monetary advantage or things like not uprooting
their children once again with a third move to a new school,
they would prefer the bridge homeowner loans.
Short term rentals can be more costly than the interest paid on
the short term bridge homeowner loans.
There is a wide variation on the rates and terms of bridge
loans, however, and the origination fees can be quite high.
Most bridge loans are written for six months and the collateral
used for these homeowner loans is the home that the borrower is
attempting to sell.
The problem with these bridge loans, besides the potential high
cost, is that homes don’t always sell in six months, and markets
and market values can change. Consider, for example, the
difference between the market value of a home in the once
thriving mining area of Allentown PA where jobs were plentiful
and homes in demand.
That same property today may well be worth one tenth of what is
was about 40 or 50 years ago. This kind of thing can happen
overnight as plants close and industries struggle to survive.
Who would have thought, for example, that there would come a
time that 20,000 IBM employees would vacate the Triple Cities
(Binghamton, Endicott and Johnson City) area of upstate New
York with the close of that original plant, or that Knight
Ridder Newspapers would cease to exist?
Before you consider homeowner bridge loans, look elsewhere for
funding. Your best financial bet is, of course, to avoid the
two-home ownership situation in the first place. If you can’t
stay in your current home until it sells, sell other assets
such as your boat, your second or third car, or borrow against
your 401(k).
You might even consider a temporarily lengthy commute or leave
your family in your current home, take an inexpensive rental in
your new location and fly or drive home alternate weekends.
There are plenty of homeowner loans that are smart, that are
good buys, and that will save you considerable money and may
actually make you some money. Debt consolidation loans are an
example of the latter. Bridge loans, however, are seldom the
best financial deal you can find, and are often one of the
worst.
About The Author: James Copper works as a Homeowner Loans
Advisor for http://www.any-loans.co.uk/homeowner-loans.shtml -
In his time off he likes to write on a number of different
areas of finance.
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