Buying and selling real estate often calls for creative financing.  When a buyer wants to purchase a new home before he has sold his current home he has the option to acquire what is commonly referred to as a bridge loan, also known as a swing loan.  A bridge loan is a temporary mortgage meant to bridge the gap between selling a home and purchasing a new home.  A bridge mortgage carries a higher interest rate and fees and is set for a short amount of time, one year.  A bridge loan pays off the first mortgage on the home that a home buyer is trying to sell and provides a down payment for the home that the home buyer is trying to buy.  If the home sells within the first 6 months then any unearned interest payments will be credited to the home buyer.  If the home hasn’t sold in 6 months then the borrower begins to make interest only payments on the loan, until the home sells.  When the home buyer’s original home is sold the bridge loan is paid off.  The mortgage on the new home must be financed by the same lender who extended the bridge loan.  Bridge loans are expensive because they come with high fees and typically have higher interest rates.  A bridge mortgage serves a purpose for people who want to purchase a new home before selling their current home.

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