If you are a homeowner trying to sell one home while purchasing another, financing can be a tricky proposition. No one wants to carry two mortgages; even if you could qualify, keeping up on the payments can be difficult. Bridge financing could help you obtain manageable financing to purchase your new home and secure your old home until the sale. Here is what you need to know about your bridge financing options.

Bridge financing is a short term loan to help you secure financing to purchase you new mortgage while carrying your old home until it sells. Bridge loans are available for up to 90% of the equity in your old home. You use the bridge loan to finance the purchase of your new home and carry both mortgages until the sale of your old home.

Once you sell your old home you can use the money to pay off the bridge loan and your finance charges. You have the option of carrying the bridge financing for up to a year before paying it off. This can be helpful for homeowners that need to save money before paying off the bridge loan.

Bridge Loans Can Be Expensive

Interest rates on short term loans can be high; lenders usually charge the prime rate plus a markup of up to three percent. There are also lender fees and pre-paid interest charges you may be required to pay. There is risk involved when using bridge financing; if the sale of your old home falls through and you are unable satisfy the loan contract the bank could take your old home.

To learn more about your mortgage options, including how to avoid common homeowner mistakes, register for a free mortgage guidebook.