Why bridge financing can be a very good thing

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I’ve had more than one sale this spring get extended, from one day to one month. When a client’s sale doesn’t close as scheduled, it can have serious consequences if they were counting on using those funds to buy something. Fortunately, none of them were affected seriously, either because they weren’t buying or because they had already closed their purchases through bridge financing.

Bridge financing basically gives you an advance on your sale proceeds. If you were expecting to get, say, $100,000.00 at the time of your sale, you borrow that money a week or two early, pay a higher rate of interest, and then pay it back the day your sale closes.

There are some definite benefits to doing this. First, the cost of the interest is more than compensated for by the decrease in stress. You know that your purchase is going to close, and likely earlier in the day, because we don’t need to wait on your buyer to be ready; we only need to wait for your money to come in.

Second, in the worst case scenario of something happening on your sale, you at least can already get into your new home. Your buyer will usually be covering your interest, so there would be no financial loss to you.

If you have the option to close your purchase and sale on different days and qualify for a bridge loan, you should seriously consider it.

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