Texas Mortgage Bridge Loans

Texas Mortgage Bridge Loans Explained

Like traditional mortgages, Texas mortgage bridge loans are very similar to those offered in other states. A mortgage bridge loan is a short term or temporary financing arrangement that enables you to use the equity in your current home as collateral for the purchase of another property.

In effect, the lender will provide you with the funds you need to make a down payment on the property that you want. You can thus close on your new home even prior to the sale of your current residence. As its name suggests, this loan "bridges" the gap between the funds that you have available and the funds that you actually need in order to purchase the property that you want.

How It Works

Once you are approved for a bridge loan, the funds will be used to make the down payment on the home you want to buy. This enables you to close on it even before you sell your present home. This may not only help you beat other interested buyers to the sale, but it may also enable you to negotiate better terms with the seller.

There are a number of different mortgage bridge loans available in Texas.

1. The first type of bridge loan will pay off the entire amount of your first mortgage, providing you with the funds that you need to make a down payment on the new home. With this type of mortgage loan you will not have to make monthly payments. Instead, once the current property is successfully sold, the proceeds will merely be used to pay off the bridge loan completely along with the accumulated interest.
2. For the second type of bridge loan, you will borrow against the equity in your first home and then use that loan to make a down payment on the home you want to purchase. Similarly to the bridge loan described above, you will typically not be required to make monthly loan payments but rather pay it off in full with the proceeds from the sale of your first home.

When your previous home is sold, the proceeds will be used to pay off the bridge loan.

• If the home is sold before the loan term is over - typically six months - you will be credited any unearned interest.
• If the home stays on the market for longer than the six-month term, you will make interest-only payments on the bridge loan.
• If the market is slow and your home is still on the market after the loan term expires, you will have to renegotiate the terms of the bridge loan.

Mortgage bridge loans usually cost much more than conventional mortgage loans. Higher interest rates will typically apply, and the first 6 months interest may have to be prepaid. At the closing of the loan there will also be points to be paid, which can be as much as two percentage points higher than that of a conventional 30-year mortgage.

Bridge Loan and Mortgage Resources for Texas Residents

During recent real estate booms in the past, the use of bridge loans to purchase residential properties in the hot housing market became a relatively commonplace form of real estate financing. Previously, bridge loans had been a fixture of commercial real estate. In response to this growing demand, many Texan and national mortgage lenders have made these loans available for this purpose.

These include:

• Prudential Texas Properties
• Summit Lending Group
• BRT Realty Trust

Here are a few commercial Texas mortgage bridge loans:

• CD Reed Mortgage Bankers
• Urban Coyote Funding
• American Eagle Capital

The terms and conditions on bridge loans will vary from one lender to the other within the state of Texas. It is essential that you learn and fully understand them as they apply to your particular loan.