When you’re trying to buy a house before you sell your current home, finding the money to pay for the purchase isn’t always simple. Bridge loans from the best hard money lenders San Diego allow you to borrow against the equity in your old home and use that equity to buy a new property. This makes it easier to get into your dream home quickly, but before you start shopping for bridge loans, you need to understand the pros and cons of this unique type of financing.

They Have Shorter Repayment Terms

When compared to conventional mortgages, hard money loans have significantly shorter repayment terms than traditional mortgages. This might sound like a downside, but it actually works in your favor. Those short repayment terms mean you’ll end up paying less interest over the life of the loan. Once you sell your original house, you’ll be able to settle the bridge loan.

They Help You Make Better, Stronger Offers

When you’re trying to buy a house in a seller’s market, you need to make your offer stand out from the others they receive. This means having earnest money in place and a large enough down payment to secure a new mortgage. When you take out a bridge loan, you’ll have the cash on hand to do just that. That means you’ll be more likely to get into the home of your dreams rather than missing out on your ideal property.

They’re Easy To Qualify For

When you apply for bridge loans, hard money lenders look at the equity you have in your original house. They put far less emphasis on your credit score and debt-to-income ratio than traditional lenders. This means you’ll be able to qualify for financing even if your situation is less than ideal. As long as you have equity in your home to borrow against, you’ll be able to qualify for at least some loan amount.

They Have Higher Interest Rates and Fees

Unfortunately, bridge loans aren’t the cheapest way to finance a new home purchase. They have higher interest rates and more expensive origination fees than you’ll find with a conventional mortgage. This is because California hard money lenders bear more of the risk when issuing these loans and, in part, you’re paying for the convenience of being able to borrow against the equity you have in your house. You’ll get a decision faster and receive the money more quickly, so paying higher origination fees can be worth it. Furthermore, since the loans are short-term loans, the higher interest rates won’t be a huge issue. You’ll only make a few interest payments before the loan gets paid off.

Buying a new house is stressful no matter how many times you’ve done it in the past. When you don’t have tons of money at your disposal, coming up with a large enough down payment can be almost impossible. Working with hard money lenders to get financing with bridge loans is always a great option. Take a look at your current home’s equity and consider whether borrowing against it will help you get the home of your dreams.