In case you are promoting your property in Colorado but in addition seeking to buy a brand new one, the timing of each transactions can really feel unattainable to plan completely. If you happen to depend on the fairness in your present residence to make a down cost on the brand new one, it could appear your solely possibility is to promote, transfer out, and discover a third location to dwell whilst you store for the brand new home. However earlier than you resign your self to months of mayhem, you might contemplate a bridge mortgage to streamline the method and cut back stress.
DISCLAIMER: As a pleasant reminder, this publish is meant for instructional functions, not monetary recommendation. If you happen to want help navigating the usage of a bridge mortgage in Colorado, HomeLight encourages you to achieve out to your personal advisor.
What’s a bridge mortgage, in easy phrases?
In actual property, a bridge mortgage is meant to be a handy and quick means to purchase your new residence with out ready in your previous home to promote. This short-term financing (additionally referred to as a swing or bridging mortgage) helps householders through the transition between properties.
A bridge mortgage is usually dearer than a standard mortgage as a result of there may be extra threat concerned for the lender. The bridge lender will mortgage the customer the fairness they’ve constructed of their current home to allow them to transfer ahead with the acquisition of a brand new residence.
How does a bridge mortgage work in Colorado?
A standard actual property situation the place a Colorado purchaser wants to use for a bridge mortgage is after they must buy their new property earlier than their previous residence has offered. On this case, they’ll use the fairness from their earlier residence to cowl the down cost and closing prices for his or her new buy.
In lots of circumstances, the lender offering your new mortgage can even deal with your bridge mortgage. They sometimes require that your current residence be listed in the marketplace and can provide this bridge mortgage for a most of six months to at least one full yr.
Relying in your distinctive scenario, the lender on the brand new residence would possibly must calculate your debt-to-income ratio (DTI). The DTI equation would come with the funds out of your present mortgage in your previous home, your new cost on the house you’re buying, and the interest-only cost on the bridge mortgage (if relevant).
Nevertheless, your lender would possibly solely have the ability to embrace your new mortgage cost in case your earlier house is underneath contract and the brand new purchaser has closing mortgage approval for his or her buy. Lenders do that to make sure it is possible for you to to make the funds on each properties within the occasion that your property doesn’t promote instantly.
What are the advantages of a bridge mortgage in Colorado?
There are advantages to borrowing a bridge mortgage that may place you as a extra versatile homebuyer.
